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Pound slumps amid BoE rate cut bets

Central bank interest rate cut speculation has triggered some notable movement in the currency market over the past couple of weeks.

During this period, we’ve seen GBP/EUR slide from €1.17 to €1.16, while EUR/GBP has traded between £0.85 and £0.86.

At the same time, GBP/USD slumped from $1.28 to $1.26, while EUR/USD retreated from $1.09 to $1.08.

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Staying on top of the latest currency news can help you time your transfers more effectively, so find out what you should be looking out for over the next couple of weeks…

What’s been happening?

A GBP selling bias has emerged over the past couple of weeks, with the pound retreating from multi-month highs in mid-March as a dovish shift by the Bank of England (BoE) gave rise to expectations the bank will start cutting interest rates from June.

Growing bets for an April rate cut from the European Central Bank (ECB) have acted as a headwind for the euro, amid a chorus of dovish speeches from ECB policymakers.

The US dollar, meanwhile, has bounced back from its recent lows as USD investors forecast the Federal Reserve will now only deliver two rate cuts in 2024, despite some dovish signals following its latest policy meeting.

What do you need to look out for?

Looking ahead, the latest US jobs data could trigger a reversal in the US dollar’s fortunes at the start of April, as a drop in payrolls could revive expectations for three rate cuts this year.

Meanwhile EUR investors will be focused on the Eurozone’s latest consumer price index as another deceleration in inflation is likely to compound bets for an April rate cut.

At the same time, the absence of any notable UK economic data could leave movement in the increasingly risk-sensitive pound tied to market risk dynamics. Will a cautious mood leave GBP exchange rates vulnerable to losses?

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