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20/05/24
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GBP Flat After BoE Indicates Rate Cut
On Monday the British pound was virtually unchanged and GBP/USD traded at about 1.2704 in the European session.
Last week was a strong one for the pound and it gained 1.4%. GBP/USD hit a high of 1.2711 last week, the highest level since March 21.
The markets will be watching the UK’s inflation report on Wednesday. The CPI for April is expected to have fallen to 2.1%, down from March’s 3.2%. This will be a significant achievement for the BoE, which has managed to slash inflation from over 10% and has pushed to bring inflation back down to the target of 2%.
On Monday, Bank of England Deputy Governor Broadbent said it was possible that rates would be cut in the summer. He said that rates would have to be cut at some stage, but it would depend on services inflation and wage growth easing as the BoE had forecast. The inflation report on Wednesday will be a crucial factor in the BoE’s rate path.
On Tuesday, BoE Governor Bailey will speak at an event and markets will be watching closely. If Bailey also indicates that a rate hike is likely in the summer, the British pound may lose ground.
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