Pound (GBPUSD=X, GBPEUR=X)

The pound rose against the dollar on Thursday afternoon, up 0.3% to trade at $1.3337, at the time of writing.

This came after the Bank of England (BoE) announced an interest rate cut of 25 basis points (bps), lowering the base rate to 4.25%, as expected. This marked the central bank's fourth reduction since rates peaked at 5.25% last year.

Following the decision, BoE governor Andrew Bailey said: “Inflationary pressures have continued to ease so we’ve been able to cut rates again today. The past few weeks have shown how unpredictable the global economy can be."

Read more: Bank of England cuts interest rates to 4.25%

“That’s why we need to stick to a gradual and careful approach to further rate cuts. Ensuring low and stable inflation is our top priority.”

Ruth Gregory, deputy chief UK economist at Capital Economics, said that despite cutting rates on Thursday, the BoE "poured some cold water on the markets’ expectations that it is going to speed up the pace of rate cuts."

"As it happens, we no longer think the Bank will slow the pace of rate cuts, so we have added in one more 25bps rate cut to our forecast for this year, taking rates down to 3.75%," she said. "Moreover, the risks to our view that rates will fall to 3.50% next year lie to the downside, although we doubt the bank will cut rates more quickly than 0.25% per quarter."

The US dollar index (DX-Y.NYB), which measures the greenback against a basket of six currencies, was up 0.4% to 99.97.

The BoE's decision comes after the US Federal Reserve decided to keep its rates on hold on Wednesday, sticking to a range of 4.25% to 4.5%, where they have stood since December.

Fed chair Jerome Powell said during his press conference on Wednesday: "My gut tells me that uncertainty about the path of the economy is extremely elevated, and that the downside risks have increased."

In addition to interest rate cuts, the latest developments around US president Donald Trump's tariffs were also in focus, with hopes that a potential trade deal between the UK and US would be announced later in the day.

Read more: Stocks that are trending today

In a social media post on Wednesday, US president Donald Trump teased that a trade deal announcement would be coming on Thursday, with a news conference to be held at 10am ET.

He said that the conference concerns a "MAJOR TRADE DEAL WITH REPRESENTATIVES OF A BIG, AND HIGHLY RESPECTED, COUNTRY. THE FIRST OF MANY!!!"

Bloomberg reported that, according to people familiar with the matter, the agreement is expected to be with the UK.