Sterling was set for its most significant weekly decline against the dollar since December, sending ripples through the currency market, with all eyes fixed on the impending Bank of England (BoE) interest rate decision.
The recent slump in the pound follows a period of notable strength, driven by speculations that the BoE would maintain higher rates compared to its counterparts.
According to a BoE survey, the British public’s expectations for 2024 inflation have dwindled over the past quarter, potentially easing concerns for policymakers deliberating rate adjustments.
Despite economic data indicating a pickup in Britain’s housing market in February and a modest 0.2% growth in January after a recessionary dip in late 2023, uncertainty looms over the BoE’s upcoming decision.
Market expectations lean towards the BoE maintaining its 5.25% rate next Thursday, aligning its pace of rate cuts slightly behind the European Central Bank and the Federal Reserve throughout 2024.
BNP Paribas economists anticipate a cautious stance from the BoE, refraining from signaling the timing of potential rate cuts and retaining a neutral stance from February. They predict a gradual reduction starting in June, totaling a 1-percentage point cut by the end of 2024.
