GBP/USD daily
The pound is the FX laggard today after the Bank of England cut rates in a unanimous decision that was accompanied by a soft growth forecast.
“We expect to be able to cut the bank rate further as the disinflation process continues, but we will have to judge meeting by meeting, how far and how fast,” said BOE Governor Andrew Bailey.
The market has an idea of how far and how fast.
OIS market pricing shows just a 23% chance of a cut at the next meeting on March 20 but is fully priced for a cut on May 8. By the August 7 meeting, there are 53 bps in easily priced in.
For year-end, the market is pricing 64.6 bps in easily, which is two full cuts and a 58% chance of a third cut. If we get three cuts, that would put the bank rate at 3.75%, which would still leave plenty of room for easing if growth stumbles.
