Home Daily Commentaries UK interest rate due to be cut

UK interest rate due to be cut

Alex Hartley
Written by
Alex Hartley

Alex Hartley

OFXpert

Driven by a passion for currency markets and data movement, Alex finds great appeal in the dynamic nature of the industry.

| Thursday 6 February, 2025

Daily Currency Update

US ADP national employment report showed private sector employment increased by 183,000 jobs in January. The report also confirmed that annual pay was up 4.7%. A better-than-expected number of jobs added against forecast furthers the case for a stable labour market that allows the Federal Reserve time as it contemplates its next policy move. US data also released ISM services PMI yesterday, which showed its seventh consecutive expansion figure. The number was below forecast, pointing towards business activity and new orders as to the reason, but remained above 50.0 for the 53rd time since the coronavirus pandemic-induced recession began in June 2020.

US-China tariff concerns persist. The retaliatory tariffs China are set to impose on US imports next week remain which is seeing market participants return to safe haven currencies (USD, JPY and CHF) with riskier assets out of favour. This has seen the USD gain back against the EUR and GBP in the past 24 hours as we near the deadline for a deal to be struck between the two locations. Unless a deal is struck, or any further tariffs are announced, this could be a trend for the USD into the weekend.

Key Movers

The Bank of England is set to give its latest interest rate announcement at 12pm today. It is widely expected that a 25 basis point cut will be announced, with a 97% probability, which would be the third reduction in borrowing costs since the peak of 5.25% in August 2023. Due to this, currency movement has already aligned itself with the release but future direction still remains uncertain with inflation remaining sticky. This could force policy makers to rethink the 0.75-1% interest rate cuts factored in for 2025 and this will change the trajectory for GBP against the EUR and USD.

GBP/USD has been falling since midday yesterday, dropping below 1.2500 and under 1.2450 at time of writing. GBP/EUR has also dipped back below 1.2000, after being as high as 1.2040 on Wednesday. EUR/USD is dropping and is closer to 1.0350 for today’s start.

Expected Ranges

  • GBP/USD: 1.2350 - 1.2490 ▼
  • GBP/EUR: 1.1930 - 1.2050 ▼
  • GBP/AUD: 1.9760 - 1.9975 ▼
  • EUR/USD: 1.0290 - 1.0420 ▼

Written by

Alex Hartley

OFXpert

Driven by a passion for currency markets and data movement, Alex finds great appeal in the dynamic nature of the industry. With over 20 years of experience, Alex works closely with businesses to understand their foreign exchange requirements and align them with solutions. Placing a strong emphasis on customer service, he takes pride in nurturing long-lasting relationships with clients.

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