Pound Under Pressure Ahead of BOE Interest Rate Decision
The British pound (GBP) is at risk of weakening if the Bank of England (BOE) sends a dovish signal when it announces a long-expected interest rate cut today. Investors have already fully priced in this rate cut and are even expecting another cut before the end of the year.
However, if the BOE signals a faster-than-expected rate cut, it could surprise the market and put further pressure on the pound. Currently, the central bank faces a dilemma: headline inflation remains high at 3.6%, while services inflation remains sticky at 4.7%, prompting the BOE to remain cautious.
On the other hand, labor market conditions are showing signs of weakening. Unemployment is rising and wage growth is slowing. BOE Governor Andrew Bailey has previously stated that deeper cuts could be possible if labor market conditions worsen—and now those signs are emerging.
With internal disagreements within the Monetary Policy Committee (MPC), the possibility that the market is underestimating the potential for additional interest rate cuts remains open. If the BOE emphasizes concerns about the labor market, the GBP could fall further, erasing recent gains driven by a weaker US dollar. (ayu)
Source: Newsmaker.id
