The pound sterling weakened against major currencies on Tuesday after the Bank of England (BoE) signaled that interest rates are likely to remain at record lows for longer than previously anticipated. The BoE’s Monetary Policy Committee (MPC) unveiled its forward guidance policy, linking future interest rate hikes to a fall in the unemployment rate to 7%.

However, the market’s reaction suggested investors interpreted the guidance as a sign that the BoE is in no hurry to raise rates, even if the unemployment threshold is reached. This dovish interpretation put downward pressure on the pound.

Analysts noted that the BoE’s commitment to keeping rates low until certain economic conditions are met, even with improving economic data, dampened enthusiasm for the currency. The central bank’s focus on unemployment as a key indicator also introduced uncertainty, as other economic factors could warrant a different policy response.

The pound’s decline was most pronounced against the US dollar and the euro. The currency’s performance against other currencies was mixed, reflecting broader market sentiment and risk appetite.

The BoE’s forward guidance is intended to provide greater clarity and predictability about its future policy intentions. However, the initial market reaction indicates that the message may not have been fully understood or accepted by investors.

Going forward, the pound’s trajectory will likely depend on incoming economic data, particularly employment figures, and how the market interprets the BoE’s evolving communication strategy.