BoE in UK Election Staying Out or Not?

GBP

After a tough start to May for £-€ enduring a 1% loss, the pair certainly found its feet as the month went on and gained 1.5% over the last couple of weeks. The bullish path started when UK inflation didn't quite drop to the 2% that was forecast and then things heated up some more after UK Prime Minister Rishi Sunak announced a general election for July 4th.

The reason for the latter was because experts believe the Bank of England will not cut interest rates before the general election. Lower interest rates mean a devalued currency and many had the UK cutting interest rates this month and therefore were anticipating a weaker Pound following the event.

However..

If the BoE cut interest rates just 1-month before the general election, it could be seen as 'taking sides' and the decision would be scrutinized as so. Whilst the BoE is owned by the Government, it is free from day-to-day political influence and so any decision being made should not take into account the general election. If a June cut doesn't arrive, it will almost certainly come in August.

The UK takes a back-seat in the economic calendar this week, but GBP is 'favourable' across the board and looks poised to making more gains..

EUR
This week is all about the Euro-Zone/€. The ECB is fully expected to cut interest rates on Thursday which will become the first major bank to make the move. The Euro's value has already been priced in for the last couple of months and so there shouldn't be much volatility on release (unless of course they keep the interest rate unchanged which is unlikely).

The press conference after is a main event because we will hear whether further guidance will remain data-dependent or if there is some form of road-map on rates. The EU's economy is rebounding well, but it's unclear whether the ECB will cut again near-term which will keep the € 'stable' for now.

USD
£-$ is enjoying a 10-week high currently and will increase in value some more this week if the US undershoots on its economic releases, namely the jobs report. The main upside issue with this pair is that economists have the US fully priced in for a December interest rate cut, which is likely to be months after the UK. Therefore making forward contracts appealing at current levels.