Financial markets are predicting a 60%+ chance that the BoE will cut interest rates at this Thursday’s meeting. How will Sterling react in the run up to the meeting?
Forex Update: As of 14:00, these are your best and worst performers based on the London trading schedule: 🇯🇵JPY: -0.01% 🇪🇺EUR: -0....report this week with financial markets now seeing a 60%+ chance that the BoE will start cutting interest rates on Thursday at noon UK. At the June meeting the decision to keep rates unchanged was seen as ‘finely balanced’ while annualfell to 2% in May, hitting the central bank’s target. UK services inflation remained elevated at 5.
The hardening of rate cut expectations can be seen in short-dated UK borrowing costs, with the yield on the 2-year Gilt falling steadily since early June to its lowest level in 14 months.weakness. Since then, GBP/USD has given back around two cents on lower bond yields and rising rate cut expectations. The US Federal Reserve will announce its latest monetary policy settings this week, one day before the BoE, with markets only assigning a 4% chance that the Fed will cut rates.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/USD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBP/USD price trend may soon reverse lower despite the fact traders remain net short.
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