UK recession puts pressure on BoE to cut rates
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Daily Currency Update
Yesterday's plunge into a technical recession in the UK has triggered speculation that the Bank of England might accelerate interest rate cuts to stimulate economic growth. Money markets anticipate the initial rate cut to occur by June, with rates potentially decreasing from 5.25% to 5%, and further drops are expected to bring rates down to 4.5% by the close of 2024.Thus far this week, the pound appears poised to record its first weekly decrease against the euro in two months, marking a slight 0.1% dip, while against the dollar, it is anticipated to experience a 0.2% decline. The Bank of England is resolute in its efforts to curb inflation, currently standing at 4%, which is twice its designated target.
Key Movers
The US dollar maintains support due to its higher interest rates compared to other major currencies and its perceived safety. Being more liquid and backed by diverse US markets, as well as holding a robust AA rating and serving as the world's reserve currency, contribute to its stability. Given the current decrease in volatility, investors may find holding dollars while awaiting developments to be an obvious choice.Expected Ranges
- GBP/USD: 1.2525 - 1.2615 ▼
- GBP/EUR: 1.1655 - 1.1720 ▲
- EUR/USD: 1.0725 - 1.0795 ▼