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European session review: GBP weakens as all eyes on BoE’s interest rate decision

TimeCountryEventPeriodPrevious valueForecastActual
07:00United KingdomPSNB, blnFebruary17.0386.2-7.477
08:30GermanyServices PMIMarch48.348.849.8
08:30GermanyManufacturing PMIMarch42.543.141.6
08:30SwitzerlandSNB Interest Rate Decision 1.75%1.75%1.50%
09:00EurozoneManufacturing PMIMarch46.54745.7
09:00EurozoneServices PMIMarch50.250.551.1
09:30United KingdomPurchasing Manager Index ServicesMarch53.853.853.4
09:30United KingdomPurchasing Manager Index Manufacturing March47.547.849.9

GBP fell against most of its major rivals in the European session on Thursday as investors prepared for the announcement of the Bank of England’s (BoE) rate decision at 12:00 GMT.

Expectations are for the British central bank to keep its Bank Rate at a 16-year high of 5.25% for the fifth straight meeting today while pointing to elevated indicators of inflation persistence and the need to remain monetary policy restrictive for sufficiently long to return inflation to the 2% target sustainably. Also, the BoE’s governor Andrew Bailey is expected to signal again that the next move will be a cut in the interest rates but without giving a clear indication of the timing of it. 

Yesterday’s cooler-than-anticipated UK February CPI data prompted a slight increase in markets' expectations that the first rate reduction will come in June - to marginally above 50%. Meanwhile, a cut in August is fully priced. Overall, markets are betting on 70 basis points of policy easing this year, or just under three decreases of 25 basis points in BoE’s Bank Rate. This is up from 60 basis points foreseen at the beginning of this month but well behind 150 basis points expected in late December 2023.

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