While testifying before the UK Treasury Select Committee on Tuesday, Bank of England (BoE) Governor Andrew Bailey said that the UK economy is at full employment and added it is already showing distinct signs of an upturn.

"We are looking beyond the temporary period when we expect CPI to return to target this year," Bailey said and added that he is looking for a more sustained progress on reduction of more persistent elements of inflation.

Key takeaways

"We are seeing some signs pay growth is adjusting down in line with lower headline inflation."

"We don't need inflation to be back at target before cutting rates."

Market reaction

GBP/USD edged higher with the initial reaction to these comments and was last seen trading at 1.2610, where it was up 0.15% on a daily basis.