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Financial markets await BoE interest rate decision

The UK now offers the second-most attractive interest rates in the G10 and is anticipated to hoover up foreign investment near-term..

Has the unexpected 50bp interest rate cut by the Fed last night accelerated the pace of which the BoE cuts its own interest rate??

It may not today, but at some point in the very near future it surely will have done. There is currently a 35% chance the UK cuts its interest rate today. Money markets priced in the same for the US cutting by 50bp yesterday. As i have said repeatedly all year, money markets are more often wrong than right..

UK inflation is overall barely stubborn anymore and the economy is slowing and so a rate cut today wouldn't be a surprise. Plus, GBP is trading in both the very high ranges versus the EUR & USD which then puts strain on exports, which will be of concern to the central bank. 

The Pound usually dips ahead of any interest rate cut and today should be no different. However, it's what happens after that matters as we could see a 1% swing once markets have digested the decision.

For now, GBP v USD has spiked to a two-and-a-half-year high after the Fed's bumper 50bp rate cut last night and so obviously represents fantastic SPOT, hedging and/or forward contract opportunities. 

GBP v EUR also offers the same favourable conditions, especially after gaining 0.5% this week after the UK's inflation print remained unchanged. Whether or not you choose to stick or twist before the risk event ahead today, overall Sterling is and will be in a strong position for the near-term. 



Expected mid-market ranges for September 19th 2024


gbp

GBP
usd

USD


    $1.3100 - $1.3300    





gbp

GBP
eur

EUR


    €1.1750 - €1.1950    



On this day -

In 1356, English forces under Edward the Black Prince defeat the French and capture French King John II during the Hundred Years' war


In 1870, the Siege of Paris by Prussian forces begins


In 1893, New Zealand becomes the first country to grant all women the right to vote


In 1986, the US announces the first antiviral medication to prevent and treat HIV/AIDS



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