Excel Currencies Blog

Tomorrow, the Bank of England are set to cut interest rates by 25 basis points. The drop looks to be already priced into GBP's current value and so the release may not affect the Pound.

However, historically Sterling weakens in the build-up to an interest rate decision, so something to be aware of for those who have yet to hedge or lock-in any near-term exchanges. 

The outcome of the vote can also create volatility. For example, in three of the meetings last year, the vote divergence caused a 1% shift in £'s value and on two other occasions we saw a 0.5% change because the result of the vote being different to the consensus. 

The meeting after the outcome is always a must watch for traders and investors to listen to the man who moved Sterling more than any other event last year, BoE Governor Bailey. Any change in policy will create market volatility. 

1 interest rate cut per quarter (25bp) is the projection from most economists in 2025 for the UK, meaning by year-end we should see things under 4% (last seen March 2023). Back then, £-€ was trading at 1.13 mid-market (6% lower than today)..

Central banks and interest rates were the main market drivers last year and whilst thankfully that looks to not be the case for 2025, they will still play a prominent role especially with divergences between the EU-UK-US.