Andrew Bailey speaks UK economy

Daily Currency Update

Bank of England Governor Andrew Bailey will deliver a keynote address at ‘Financial System Conference, achieving good outcomes in an uncertain world’ organized by the Central Bank of Ireland. A bleak outlook on the UK economy along with the potential of a rate cut in 2024 weighs down the pound.

Given that the risk of the UK economy entering a recession is high, Bailey's remarks will be looked upon to reaffirm predictions for a rate cut in August 2024. In fact, the BoE's Chief Economist Huw Pill said on Monday that the central bank might wait until the middle of next year before cutting interest rates from their current 15-year high. The money markets are now indicating that UK interest rates will be cut to 4.5% by December 2024, down from 5.25% at present.

The Eurozone labour market will remain strong due to structural reasons and support earnings as inflation continues to fall, boosting growth and ensuring it will be many months before the European Central Bank will be in a position to cut interest rates. The markets eagerly await the Retail Sales data from the Eurozone today.