The British pound’s resilience this year (+5.4%) against the US dollar remains fervent as sticky inflationary pressures within the UK persist. The euro has followed a similar trend as the Bank of England’s (BoE) interest rate cycle continues in an aggressive manner. Money markets (refer to table below) favor a 25bps rate hike in September but the probability has shifted from almost 92% to just 80% with a greater chance of a larger half basis point increment gaining traction. This will theoretically give GBP additional support as the Fed is expected to keep rates on hold.
BANK OF ENGLAND INTEREST RATE PROBABILITIES
BANK OF ENGLAND INTEREST RATE PROBABILITIES