GBP Braces for BoE Rate Decision; EUR and USD Eyes Turn to ECB and U.S. Election Outcomes

GBP

The spotlight in the UK FX market is on Thursday afternoon, when the Bank of England (BoE) will announce its latest interest rate decision. Currently, inflation has eased to 1.7%, below the BoE’s target of 2%. Markets are widely anticipating a 0.25% rate cut, which would bring the base rate to 4.75%

Despite the likelihood of this cut (with market odds at 98%), significant GBP sell-off is unlikely. However, should the BoE take a dovish stance and keep rates steady, the GBP may appreciate by approximately 1%. Conversely, if the BoE adopts a more aggressive rate cut beyond the expected 0.25%, GBP could face a steep decline, potentially hitting fresh lows for Q4 2024.

EUR

The Euro has gained 1% against both the GBP and USD over the past week. All eyes will be on ECB President Christine Lagarde, who is set to discuss the state of the euro-zone economy on Tuesday and Wednesday.

USD

In the U.S., market attention is focused on both the presidential election outcome and the Federal Reserve’s interest rate stance. The election result, expected around 4:00 AM UK time on Wednesday, remains highly uncertain, with polls showing a tight race between Kamala Harris and Donald Trump. Market sentiment suggests a Trump win could bolster the USD, while a Harris win brings a degree of uncertainty given her newcomer status, which may impact expectations around her economic agenda.

At Currency Global, we are dedicated to helping businesses and individuals effectively manage foreign exchange risks through expert insights, personalised guidance, and tailored strategies. If you have upcoming currency needs or are interested in placing live limit orders to capitalise on potential short-term market fluctuations in the next two weeks, please reach out to one of our consultants at 020 3876 5432.