Home Daily Commentaries UK recession puts pressure on BoE to cut rates

UK recession puts pressure on BoE to cut rates

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 ▼

Written by

See Wah Li

OFXpert

See Wah is passionate about supporting positive transformations when it comes to managing foreign exchange. As a Senior Currency Consultant at OFX, his goal is to help businesses make informed decisions, alleviate risks, and enhance their currency strategies for success. With over 6 years of experience in the foreign exchange market, See Wah’s strength lies in developing effective solutions to help navigate the complexities of currency fluctuations and mitigate their impacts on business profitability.