Pound Rebounds as Weaker Dollar Buoys Currency, Rate Cut Expectations Remain Steady

Following Chief Economist Huw Pill’s suggestion that the Bank of England may consider cutting interest rates during the summer, the British pound experienced a slight decrease against the US dollar on Tuesday. However, the pound subsequently recovered and reached its highest level in almost two weeks against the dollar, trading at $1.2610 on Wednesday. This increase can be attributed to the weaker US dollar, which dropped to a one-month low against the euro amid lower Treasury yields. Market expectations for future BoE rate cuts remain relatively stable, with a probability of approximately 50% for a first move in June, followed by a 25 basis point rate cut in August and over 50 basis points by the end of the year. As for the euro, the pound barely changed against it, trading at 85.90 pence per euro. Some experts suggest that, in the long run, the significantly higher interest rates in the UK compared to the Eurozone will limit the appreciation potential of the euro against the pound and potentially lead to a decline in the value of the latter.