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Monthly Wrap: GBP – Pound soars as markets rule out BoE rate cut in June 

Heath Robinson June 5th 2024 - 2 minute read

Key takeaways: 

  • Pound surges as BoE rate cut bets fall
  • UK general election to stoke volatility going forward?
  • GBP monthly lows: €1.16, $1.24, AU$1.89, NZ$2.06, C$1.70
  • GBP monthly highs: €1.17, $1.28, AU$1.92, NZ$2.09, C$1.74

The pound got off to a poor start in May. Sterling faced pressure as the Organisation for Economic Co-operation and Development (OECD) slashed its UK growth forecasts and the Bank of England (BoE) struck a dovish tone in the wake of its May interest rate decision. 

GBP exchange rates then rallied through the second half of May. Initial support came amid an improving market mood. 

These gains were then turbocharged as the odds of a June rate cut from the BoE plummeted to almost zero. 

This followed the publication of the UK’s latest consumer price index, which reported a smaller-than-expected fall in inflation in April. 

Rishi Sunak’s surprise call for a general election on 4th July was then the final nail in the coffin for a June cut, as the BoE wouldn’t want to be seen as influencing the election by altering its monetary policy before polling day. 

Looking ahead, with the BoE now expected to leave interest rates on hold this month and its forward guidance likely to be limited, the focus for GBP investors is likely to increasingly turn to the UK’s upcoming general election. 

Volatility in the pound is likely to grow as we get closer to polling day as Labour and the Conservative vie for support from voters. 

With polls currently showing Labour with a healthy lead, GBP investors will be particularly focused on any fiscal policy announcements from Keir Starmer’s party as they seek to gauge what they could mean for the UK economy. 

Elsewhere, the UK’s latest wage growth and inflation figures will be closely watched as they will shape expectations for a potential interest rate cut from the BoE in July. 

Written by
Heath Robinson

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