BoE to follow Fed with rate cut as pound to fall against Dollar

Matthew Ryan, CFA Ebury

The Pound continues to trade around 1% higher on the dollar since the day of the Autumn Budget, but we are not entirely convinced that this resilience can hold for too much longer, particularly should the Fed deliver a “hawkish cut” later today.

The Bank of England is almost certain to follow suit with a rate cut of its own next Thursday, and yesterday’s remarks from MPC officials before the Treasury Committee suggest that it could sound more dovish than we had anticipated.

According to officials, the latest Labour budget could shave as much as half a percentage point off the annual rate of UK inflation, beginning the second quarter of 2026, with members Lombardelli and Dhingra attributing the recent episode of high inflation to supply side problems and commodity prices, rather than demand issues.

This is not exactly the type of rhetoric that would suggest that a December cut will be the last, and we now await Governor Bailey’s comments later in the week to either validate or call into question this view.

Author

Matthew Ryan, CFA

Ebury

Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.

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