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by The British pound recently fell to $1.276 (GBP/USD), nearing its lowest point in a month. This decline is mainly due to investor expectations that the Bank of England will implement faster interest rate cuts.
GBPUSD Fundamental Analysis – 6-August-2024
Growing fears of a potential recession in the United States fuel these expectations. This economic concern has also led to British government bond yields dropping to new lows not seen in several months.
Market analysts now anticipate that the Bank of England will introduce two quarter-point rate cuts by December. This sentiment was reflected on Monday when interest rate futures indicated 56 basis points in cuts for this year, compared to 47 basis points expected the previous Friday.
- Also read: EURUSD Fundamental Analysis – 6-August-2024
Additionally, the yields on two-year gilts, which indicate changes in borrowing costs, fell by 8 basis points to 3.526%. This represents the lowest level for two-year gilt yields since April 2023.
Last week, the Bank of England made a significant move by cutting its benchmark interest rate from 5.25%, a 16-year high, to 5.0%. This was the first rate cut since 2020, marking a notable shift in the Bank’s monetary policy.
The reduction in interest rates reflects the Bank of England’s response to the current economic uncertainties and is aimed at stimulating economic growth amidst concerns about a global economic slowdown.
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