Bank of England decision tomorrow. Are all bets off?

By Matthew Boyle

All eyes this week are focussed towards tomorrow as the Bank of England meet for the first time this year to provide their decision on what the UK interest rate level should be set at and their forecast and guidance for the year ahead. This could be a big market mover for GBP rates as seen last week when ECB President Christine Lagarde prompted a Euro sell-off with her comments suggesting there could be a rate cut for the single currency as early as April.

For well over a year now Central Bank intervention has dominated what movements we have seen in exchange rates with the Federal Reserve, European Central Bank and Bank of England all fighting to battle rising inflation. Until now it has been a race to the top with the respective currencies benefiting as their central bank hiked rates and foreign money then flowed in to take advantage of improved returns.

Now as we come to and end of the first month of 2024 it seems the race will be decided on a race to the bottom decided by who cuts rates and when. Until now the BoE have maintained they will raise interest rates again should they need to, many now expect their stance will change and markets will look for any hint as to if but also when UK interest rates will be lowered.

As such until this morning GBP rates tailed off across the board as investors pulled their money off the table ahead of tomorrows anticipated release. The result of this saw GBP rates fall across the board and once again bounce off the range ceiling established against the Euro which has been established for over a year now.

Surprisingly, positive UK housing data this morning combined with poor import/export data from Germany have seen GBP/ EUR rates pick up slightly again but without doubt tomorrow is a significant pivot point for the pound and its path for the year ahead.

With markets remaining tentative and the Pound at near year long highs against the single currency and multi-month highs against the greenback, those with upcoming requirements may like to speak to A Place in the Sun Currency for guidance on how to remove potential risk in what could become a dropping market, and protect their wallets for their upcoming currency transfer or purchase of their place in the sun.