- The Pound Sterling trades sideways as investors await UK inflation and the BoE decision for fresh guidance.
- The BoE is expected to maintain interest rates unchanged as UK inflation is far from the 2% target.
- The Fed’s dot plot will guide the next move in the US Dollar.
The Pound Sterling (GBP) struggles for a decisive move in Monday’s European session as investors stay on the sidelines ahead of the interest rate decisions by the Federal Reserve (Fed) and the Bank of England (BoE), which will be announced on Wednesday and Thursday, respectively.
Investors see the BoE leaving interest rates unchanged at 5.25% as inflation is much higher than the desired rate of 2%. Market participants will keenly focus on the guidance for interest rates, namely clues about how long the BoE will keep interest rates high.
Currently, markets expec the BoE to begin reducing interest rates in its August policy meeting. However, policymakers have said that rate cuts would be appropriate only if they are convinced that inflation will sustainably rise to the 2% target.
The BoE needs to make a balancing act between high inflation and uncertainty over economic growth. The UK economy was in a technical recession in the second half of 2023, reporting contraction in the last two quarters. The nation grew by 0.2% in January but this is insufficient to confirm that the economy has returned to growth in the first quarter as a whole.
- The Pound Sterling trades sideways as investors await UK inflation and the BoE decision for fresh guidance.
- The BoE is expected to maintain interest rates unchanged as UK inflation is far from the 2% target.
- The Fed’s dot plot will guide the next move in the US Dollar.
The Pound Sterling (GBP) struggles for a decisive move in Monday’s European session as investors stay on the sidelines ahead of the interest rate decisions by the Federal Reserve (Fed) and the Bank of England (BoE), which will be announced on Wednesday and Thursday, respectively.
Investors see the BoE leaving interest rates unchanged at 5.25% as inflation is much higher than the desired rate of 2%. Market participants will keenly focus on the guidance for interest rates, namely clues about how long the BoE will keep interest rates high.
Currently, markets expec the BoE to begin reducing interest rates in its August policy meeting. However, policymakers have said that rate cuts would be appropriate only if they are convinced that inflation will sustainably rise to the 2% target.
The BoE needs to make a balancing act between high inflation and uncertainty over economic growth. The UK economy was in a technical recession in the second half of 2023, reporting contraction in the last two quarters. The nation grew by 0.2% in January but this is insufficient to confirm that the economy has returned to growth in the first quarter as a whole.
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