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Sterling drops, timing of BoE rate cuts in focus
Published by Jessica Weisman-Pitts
Posted on November 9, 2023
2 min readLast updated: January 31, 2026
Global Banking and Finance Review
Company
Published by Jessica Weisman-Pitts
Posted on November 9, 2023
2 min readLast updated: January 31, 2026
LONDON (Reuters) – The pound weakened against the dollar and euro on Wednesday, as markets continued to digest remarks from the
LONDON (Reuters) – The pound weakened against the dollar and euro on Wednesday, as markets continued to digest remarks from the Bank of England’s chief economist that interest rate cuts could come around the middle of 2024.
The pound was last down 0.4% against the dollar at $1.2251, and off a near two-month high of $1.2428 hit Monday.
Part of those moves versus the dollar come as the greenback bounced back after recent losses, but sterling was also a touch softer against the euro, which was at 87.05 pence, and up from Monday’s around three-week low of 86.5 pence.
Markets were focusing on remarks from the BoE’s Chief Economist Huw Pill on Monday that pricing in financial markets – that currently points to a first rate cut to Bank Rate in August 2024 – “doesn’t seem totally unreasonable.”
Though governor Andrew Bailey, on Wednesday, said it was “really too early to be talking about cutting rates.”
“The pound is pretty interesting,… openly speaking about rate cuts is not something central bankers are doing,” said ING FX strategist Francesco Pesole.
“I think sterling will be under pressure today because markets did not go too aggressive on pricing in those rate cuts. There’s still more for the Bank of England rate expectations to drop.”
Markets are currently fully pricing in a 25 basis point BoE rate cut in August, and pricing reflects roughly a two-thirds chance of such a cut in June. An August cut was seen as likely but not fully priced in before the remarks.
Also in the mix was an industry survey released Wednesday that showed pay growth slowed in October and rising redundancies led to an increase in the number of job-seekers.
Wage growth is one of the BoE’s considerations when assessing the stickiness of inflation in Britain, and its rate policy.
Bailey, on Wednesday, said he was “optimistic” that the BoE would return inflation to 2% by late 2025, as the bank forecast last week
(Reporting by Alun John; Editing by Bernadette Baum)
Monetary policy refers to the actions taken by a central bank to manage the money supply and interest rates to achieve macroeconomic objectives such as controlling inflation, consumption, growth, and liquidity.
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage of the principal amount. They are influenced by central bank policies and market conditions.
Foreign exchange, or forex, refers to the global marketplace for trading national currencies against one another. It is essential for international trade and investment.
Financial markets are platforms where buyers and sellers engage in the trade of assets such as stocks, bonds, currencies, and derivatives. They play a crucial role in the economy by facilitating capital allocation.
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