The British pound fell ahead of the Bank of England's decision
The pound sterling fell to the level of 1.34 dollars, recording its lowest value in a month, as investors prepare for the meeting of the Bank of England on Thursday at 2:00 pm Egypt time, this decline comes in light of widespread expectations that the British central bank will maintain interest rates at 4.25%, with markets focusing on the split of members of the monetary policy committee after their controversial decision last month.
Expectations of fixing interest with a split in votes
Most forecasts are for the Bank of England to keep interest rates unchanged, with a 96% probability of stabilization, while only a very small probability of a 25 basis point cut is expected.
However, traders will be waiting for the vote of the commission members, especially after the unexpected three-way split at the previous meeting, when one member voted for the reduction, while two preferred the increase.
Forecasts indicate that the bank may begin the easing cycle of monetary policy next August, with an expected cut of a quarter of a percentage point, especially if inflation and economic data show a further decline.
Factors that put pressure on the British pound
1. Slowing economic growth
The British economy is facing increasing challenges as growth rates decline, increasing pressure on the central bank to start easing monetary policy to support economic activity.
2. Persistent inflation risks
Although inflation has fallen from its peak, it is still above the target (2%), which makes the Bank of England cautious in taking any step towards a rate cut before it ensures full control over prices.
3. Geopolitical tensions and the impact of tariffs
The escalating conflict in the Middle East, especially between Iran and Israel, is increasing the demand for the dollar as a safe haven, weakening other currencies including the British pound.
The Trump administration's proposed tariffs also threaten to increase global inflation, which Federal Reserve Chairman Jerome Powell cited as one of the future risks.
The impact of the Fed's decision on the markets
The US Federal Reserve kept interest rates unchanged, but warned of continued inflationary pressures, which supported the strength of the dollar and negatively affected other currencies, including the pound, and this position has strengthened expectations that the Fed may wait until the end of the year before starting to cut interest.
What do analysts expect ?
Temporary stabilization of the pound if the Bank of England maintains its policy, with the possibility of a limited recovery if the committee shows a tendency towards a tighter policy.
Further weakening if a sharp split of votes appears or if the bank indicates the intention to cut interest soon.
It was greatly influenced by the upcoming economic data, especially inflation rates and growth data in the second quarter.
