Pound hits 2.5-month high against Euro amid rate cut speculations
Pound surges against euro on rate cut bets. BoE holds firm. Focus is now on Powell's words for future rate insights.
The British pound reached a fresh 2.5-month high against the euro, with markets betting on possible rate cuts by the European Central Bank (ECB).
The Bank of England's (BoE) stance remained steady, as reflected in the pound's marginal rise against the dollar. This followed the pound's largest monthly gain in a year, influenced by expectations that the US Federal Reserve would lower rates sooner than other central banks.
BoE policymaker Megan Greene expressed concerns about persistent high inflation, suggesting that UK rates might stay high for an extended period. Market projections indicate no BoE rate cut in August 2024, while the first ECB policy rate reduction is fully priced for April 2024, with a cumulative 110 basis points expected by the end of the following year.
The euro was down 0.2% against the pound, hitting its lowest since September 18. Despite some predicting a challenging economic landscape in 2024, recent PMI data and Treasury-announced tax cuts are viewed positively for the pound. Analysts note that the ECB's consideration of rate cuts may lead to further declines in the EUR/GBP pair.
The pound against the US dollar (GBP/USD) is currently at $1.235 and is set for a weekly rise of 0.3%. Traders are now closely watching what Federal Reserve Chair Jerome Powell will say this afternoon about the future of US rates.
