Sterling tanks after Guardian article

BoE Governor Bailey signals huge interest rate cut for the UK is now imminent..

Traders and investors have together devalued the Pound this morning by over 1%. This has come on the back of an interview made by Bank of England Governor Andrew Bailey with the Guardian newspaper earlier today. The headline reads 'the bank can be more aggressive in cutting interest rates if inflation news continues to be good'. 

Now this is a clear change in stance on monetary policy and so no wonder GBP has fallen today. Interestingly, the comments come just weeks after the Fed decided to surprise the majority and cut its interest rate by 50bp.

As we have been maintaining all year, what the US does, most usually follow and we believe the BoE have little to no choice but to cut by 50bp next month, which will hurt Sterling further. 

Don't say we didn't warn you about a dip, as for the last few weeks we have been pointing out that GBP has been trading at 2-year highs and at the very top of its expected trading range. The main reason for this? The BoE were not signalling what they have just now signaled.

Whilst right now the shock of 1% being lost (just like that) may be hard to take for some that chose not to bank the recent highs, both GBP v EUR & GBP v USD are only trading at 2 & 3-week lows as it stands. 

However, it's the repricing of Sterling that makes things uncertain both near & long-term and we won't really know what the Pound will be worth until the BoE interest rate decision next month.



Expected mid-market ranges for October 3rd 2024


gbp

GBP
usd

USD


    $1.300 - $1.3200    





gbp

GBP
eur

EUR


    €1.1800 - €1.1925    



On this day -

In 2333 BC, modern-day Korea is founded by Dangun Wanggeom during the reign of Chinese Emperor Yao


In 52 BC, the Gauls finally surrender to the Romans under Julius Caesar


In 1283, Dafydd ap Gruffydd, Prince of Gwynedd, Wales, becomes the first person to be hanged, drawn and quartered


In 1990, the reunification of East & West Germany



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