Daily currency update
The Bank of England is unlikely to deliver a pre-Christmas surprise for borrowers today, as it is widely expected to leave interest rates unchanged at 4.75% during its final meeting of 2024.
Money markets are pricing in an almost 99% certainty of a ‘no change’ decision at noon, with less than a 1% chance of a rate cut.
This follows yesterday’s unexpected rise in inflation to 2.6%, exceeding the Bank’s target, driven by a pickup in wages earlier this week. Despite signs of a weakening economy, the inflationary pressures have effectively dashed any hopes of a rate cut this month.
The decision to hold rates steady will maintain the UK’s relatively high borrowing costs, which could keep downward pressure on economic growth while continuing to support sterling in the FX market.
Key movers
The US dollar rallied sharply overnight, reaching its highest level in two years against a basket of major currencies. This surge followed the Federal Reserve’s widely anticipated interest rate cut, accompanied by signals that it plans to slow the pace of its monetary policy easing.
The Fed’s cautious stance on future cuts has boosted demand for the dollar, as traders anticipate higher relative yields compared to other major currencies. This shift has placed downward pressure on rivals like the Euro, with implications for businesses managing FX exposure.
Expected ranges
GBP/USD: 1.2625 – 1.2695 ↑
GBP/EUR: 1.2095 – 1.2195 ↑
EUR/USD: 1.0385 – 1.0465 ↑
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