• The Pound Sterling falls to 1.2540 as investors see the BoE easing interest rates before the Fed does so.
• UK interest rates are expected to remain steady at 5.25% for a straight sixth time after Thursday’s BoE meeting.
• Investors see the BoE beginning to reduce interest rates from August.

The Pound Sterling (GBP) drops to 1.2540 against the US Dollar in Tuesday’s London session. The GBP/USD falls as the US Dollar extends its upside, with the US Dollar Index (DXY) – which tracks the Greenback’s value against six major currencies – moving higher to 105.25.

Investors seem to remain confident about the United States' economic outlook despite the recent weakness seen in a slew of economic data such as lower labor demand, slower wage growth and contracting Services PMI in April. The overall good performance of the economy will allow the Federal Reserve (Fed) to take its time to cut interest rates compared with other central banks from developed nations.

Still, weak US economic data has fuelled expectations for the Fed to reduce interest rates from the September meeting. Uncertainty prevails over the Fed’s rate-cut timing as policymakers see the current monetary policy framework as adequate. On Monday, New York Fed Bank President John Williams said: “Eventually we'll have rate cuts" but for now monetary policy is in a "very good place," Reuters reported.