The British pound experienced mixed influences. While the initial US-UK trade deal provided some support, it was limited in scope. The Bank of England’s interest rate cut was expected, but its hawkish tone and internal dissent led to a slight scaling back of expectations for future rate cuts.
- The British pound steadied near $1.33 after the US-UK trade deal announcement.
- The US-UK trade deal preserved 10% tariffs on British goods.
- The trade deal included US procurement opportunities and delayed decisions on UK market access for American agriculture and beef.
- The Bank of England cut its key interest rate by 25 basis points.
- The Bank of England emphasized a gradual and measured withdrawal of monetary policy support.
- Two policymakers voted to keep rates unchanged, indicating internal disagreement.
- Investors slightly scaled back expectations for further rate cuts, now anticipating about 59bps of cuts by year-end.
The asset’s performance is being shaped by competing forces. Trade winds are creating opportunities yet these benefits are tempered with trade restrictions. Monetary policy is attempting to strike a balance between supporting the economy and controlling inflation, leading to some uncertainty about the path forward. The central bank’s stance is providing a counterweight to expectations of rapid monetary easing, impacting market sentiment.