It is not anticipated that the Bank of England would alter interest rates today. However, markets currently price in nearly a 50/50 possibility of a cut in June. So, the question now is whether decision-makers will lay any foundation for policy easing in six weeks.
In March, academic Swati Dhingra cast her first vote in favor of a cut, and this month, some estimate that deputy governor Dave Ramsden may follow suit. With no deadline in place, Governor Andrew Bailey has given the impression that he is comfortable lowering rates this year.
The market has fully priced in a reduction for August, while short holdings in sterling reached their highest level since January 2023 last week. If the market isn’t prepared for post-meeting guidance, the currency might weaken.
On Wednesday, the FTSE 100 in Britain reached a record high, supported in part by expectations of impending rate cuts.
The relative outlook from London could provide the range-bound euro/sterling cross some direction. The European Central Bank has all but pledged a cut on June 6, almost probably ahead of the U.S. Federal Reserve.
On Wednesday, Sweden lowered interest rates. In March, Switzerland lowered interest rates.
Strong Chinese trade figures maintained stable markets in Asia. China’s imports skyrocketed and its exports resumed growing, which may be a positive indication for domestic demand.
The April minutes of the Bank of Japan revealed a move toward hawkishness. Some members raised the possibility of rate hikes sooner than anticipated if inflation began to appear sustainable.
On Thursday, Governor Kazuo Ueda informed the legislature that the central bank was closely monitoring the yen’s decline. He stated that the bank would act if there was a chance that it might impact inflation. On Thursday, the yen held steady at 155.5 to the US dollar.
Regarding the Middle East, U.S. President Joe Biden publicly pledged for the first time to withhold arms from Israel if Israeli forces launch a significant assault on Rafah in southern Gaza.
In the meantime, Israel persisted in hitting southern Gaza with tanks and aircraft. Despite Brent crude’s steady rise above $80 per barrel, markets have not responded immediately to the changes.
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