The British pound fell in the European market on Tuesday against a basket of global currencies, continuing its losses for the second day in a row against the US dollar, due to the increasing possibility of the Bank of England cutting interest rates sooner than the Federal Reserve cuts.

In order to re-evaluate these possibilities, investors are awaiting a hearing in the British Parliament later today for Bank of England officials on the monetary policy report issued after the meeting on February 1.

Comments from UK monetary policymakers are expected to provide clearer clues about the future of UK interest rates.

Price overview

British pound exchange rate today

The pound fell against the dollar by about 0.2% to ($1.2579), from the opening price of ($1.2597), and recorded the highest level today at ($1.2598).

The pound ended Monday's trading down by less than 0.1% against the dollar, in its first loss in the last three days, amid weak trading that dominated the foreign exchange market.

British interest

Inflation and economic growth data released last week in London have increased the likelihood of a cut in British interest rates starting next May.

UK interest rate swaps show a less than 15% chance of a Bank of England rate cut by March, and swaps also show a roughly 50% chance of a UK rate cut by May.

Traders have reduced the size of the expected cuts in UK interest rates in 2024 from 134 basis points to the current 71 basis points.

Hearing session

At 10:15 GMT, the UK Parliament will hold a hearing on the Bank of England's latest monetary policy report, which is expected to provide strong evidence on the future of interest rates in the UK.

The Bank of England said after the last meeting: Consumer price index inflation is expected to fall temporarily to the 2% target in the second quarter of 2024 before rising again in the third and fourth quarters.

The bank added that although service price inflation has fallen and wage growth has been somewhat more than expected, the main indicators of continued inflation remain high.

Bank of England Governor Andrew Bailey said at the press conference: “The return of inflation to the 2.0% target in April is not a case of mission accomplished as service price pressures continue.”

Bailey explained: The Monetary Policy Committee needs to see more evidence that inflation is expected to fall to 2%, before they can consider cutting interest rates.

Artistic view

GBP resumes decline - Analysis - 02-20-2024