Potential Double Rate Cut by BoE Casts Shadow Over Pound Sterling

The Bank of England’s (BoE) monetary policy stance is poised to exert significant pressure on the British Pound (GBP). Market expectations currently center on a rate cut by August, but growing speculation suggests a more aggressive approach with consecutive reductions at upcoming meetings.

Double Cut Scenario Threatens GBP Valuation:

  • Analysts warn that back-to-back cuts could deliver a “negative shock” to GBP, potentially depreciating it against both the US Dollar (USD) and the Euro (EUR).
  • Forecasts suggest GBP/USD could plummet to 1.23, while GBP/EUR might fall as low as 1.15 under this scenario.

Factors Fueling Double Cut Expectations:

  • Recent quarters have witnessed UK inflation consistently undershoot BoE projections, potentially falling back to target within the next few months.
  • Dovish pronouncements from key BoE figures like Huw Pill and Megan Greene have fueled market anticipation for monetary easing.
  • The upcoming appointment of Clare Lombardelli to the Monetary Policy Committee (MPC) could further tilt the balance towards a dovish stance.

Countervailing Forces and Uncertainties:

The resilience of services sector inflation presents a potential hurdle to immediate rate cuts. A stronger-than-expected inflation print on Wednesday could induce the MPC to maintain rates in June.

Data Dependence and Market Volatility:

The timing and pace of potential interest rate reductions hinge on forthcoming economic data, especially the inflation report due on Wednesday. A marked deceleration in services inflation could increase the likelihood of a rate cut in June, with a possible follow-up cut in August, potentially weakening the GBP. Conversely, robust services inflation figures might postpone rate cuts until August, offering temporary support to the Pound.

Implications for Investors and Businesses:

Close attention to upcoming economic data and BoE policy pronouncements is crucial for investors and businesses. These developments will significantly impact the Pound’s trajectory and necessitate strategic adjustments in financial planning and international trade activities.

GBP/USD Short (Sell)
Enter At: 1.2375
T.P_1: 1.2300
T.P_2: 1.2224
T.P_3: 1.2139
T.P_4: 1.2060
T.P_5: 1.1964
T.P_6: 1.1818
T.P_7: 1.1579
T.P_8: 1.1454
T.P_9: 1.1346
T.P_10: 1.1147
T.P_11: 1.0947
T.P_12: 1.0774
T.P_13: 1.0558
T.P_14: 1.0371
S.L: 1.3989


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