ECB just cut... Is it BOE’s turn next week?

13 thg 6

The European Central Bank (ECB) initiated its cutting cycle last week on June 6. Expectations are that ECB policymakers are in no hurry to follow this first cut with a second one.

Next week, we will see how much of a hurry the Bank of England (BOE) is to follow the ECB.

A Reuters poll of 65 economists indicates the BOE is likely to wait until August to cut interest rates. The consensus had previously settled on a cut on June 20, so bear that in mind when taking their forecasts into account.

UK inflation eased to 2.3% in April, close to the central bank's 2.0% target, from a peak of 11.1% in October 2022. So why wouldn't the BOE cut rates this month? Well, wage and services inflation, both watched closely by the BoE, are still around 6%. The question that arises is how much the BOE weighs inflation in this sub-section of the economy against overall inflation.

On the GBP/USD chart, after reaching a three-month high, buyers were unable to keep the pair above 1,2800 to challenge the year-to-date (YTD) high of 1.2894. The next support level is possibly 1.2700.