News
BoE · Euro · Interest Rates · Sterling
Sterling strengthened to a five-month high against the euro as markets pushed back expectations for a Bank of England (BoE) rate cut, with the central bank widely expected to hold its Bank Rate at 3.75%.
The pound's appreciation occurred ahead of Thursday's BoE decision, driven by stronger UK economic data that encouraged investors to delay near-term rate-cut bets. The BoE is anticipated to maintain its Bank Rate at 3.75%, following a narrow cut late last year, and adopt a cautious stance on future easing.
Policymakers remain concerned about inflation, which persists above target and is sensitive to wage dynamics, despite recent signs of economic momentum. MUFG’s Lee Hardman stated that improved activity data prompted markets to reprice the timing of the next rate cut, supporting the pound.
Traders will closely monitor the Monetary Policy Committee's vote split and guidance language for indications of whether the committee leans towards patience or renewed easing. While markets still price further easing later in 2026, the exact timing is increasingly debated, with a steady "restrictive as needed" posture reinforcing delayed cut expectations.
