Home Daily Commentaries BoE cuts rates to 4.25% amid trade war fallout

BoE cuts rates to 4.25% amid trade war fallout

See Wah Li
Written by
See Wah Li

See Wah Li

OFXpert

With more than 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.

| Friday 9 May, 2025

Daily Currency Update

The Bank of England has lowered interest rates by 25 basis points to 4.25% in an effort to shield the UK economy from the fallout of Donald Trump’s ongoing trade war. This marks the fourth rate cut by the Monetary Policy Committee (MPC) since last August.

While the move was widely anticipated, the MPC also issued a stark warning: the UK economy is projected to slow by an additional 0.3% over the next three years, on top of previously revised down forecasts. The dovish stance and weaker growth outlook are likely to weigh on the pound, as markets may begin pricing in further rate cuts or extended periods of accommodative policy. Traders remain cautious, as prolonged softness in UK data could lead to increased volatility in GBP crosses.

Key Movers

The US dollar firmed against traditional safe-haven currencies like the yen and Swiss franc, as investor sentiment improved following the announcement of a bilateral trade deal between the US and the UK. The agreement, described by President Trump as a “breakthrough,” helped ease market tensions, despite maintaining a 10% tariff on key British imports such as vehicles.

GBP initially rose on the back of the Bank of England’s rate cut, but those gains quickly reversed as traders digested the broader implications of slowing UK growth and persistent trade uncertainties. The renewed dollar strength and fading post-BoE momentum could weigh further on GBP/USD, while improved risk appetite may limit upside in traditional safe-haven currencies.

Expected Ranges

  • GBP/USD: 1.3215 - 1.3295 ▲
  • GBP/EUR: 1.1755 - 1.1825 ▲
  • GBP/AUD: 2.0675 - 2.0755 ▲
  • EUR/USD: 1.1205 - 0.1295 ▲

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.