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Pound Weakens as Bank of England Economist Suggests Possible Rate Cuts in 2024

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The pound has weakened against both the dollar and the euro, following remarks made by the Bank of England’s chief economist, Huw Pill, suggesting that interest rate cuts could be implemented in the middle of 2024. This news has caused fluctuations in the currency markets, with the pound down 0.4% against the dollar at $1.2251 and softer against the euro at 87.05 pence.

Pill’s comments on Monday indicated that the current financial market pricing, which suggests a rate cut by August 2024, does not seem entirely unreasonable. However, Bank of England governor Andrew Bailey stated on Wednesday that it is still too early to consider cutting rates. The central bank’s openness about the possibility of rate cuts is unusual, according to ING FX strategist Francesco Pesole.

Markets are currently pricing in a 25 basis point rate cut by August, with roughly a two-thirds chance of a cut in June. Prior to Pill’s comments, an August rate cut was seen as likely but not fully priced in. These rate expectations are likely to drop further, which may put additional pressure on the pound.

In addition to the Bank of England’s remarks, a survey released on Wednesday revealed that pay growth in October had slowed, leading to an increase in the number of job-seekers due to rising redundancies. The Bank of England takes wage growth into consideration when assessing inflation and determining its rate policy.

Despite these factors, Bailey remains optimistic that the Bank of England will be able to bring inflation back to its target of 2% by late 2025, as forecasted last week.

These developments in the currency market and the job market will be closely watched by investors and economists alike, as they provide valuable insights into the overall economic health of the United Kingdom.

The pound’s performance in the coming weeks will depend on various factors, including any new statements from the Bank of England, economic data releases, and global market sentiment.

More detail via Daily Mail Online here… ( Image via Daily Mail Online )

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