The British pound is stable at $1.263, near its lowest level since mid-May. This stability comes as the US dollar strengthens following Donald Trump’s victory in the US presidential election. Investors believe that Trump’s plans—like introducing trade tariffs and cutting taxes—could boost economic growth and raise inflation. As a result, the Federal Reserve might not need to lower interest rates as much as previously thought.
BoE Likely to Cut Rates Amid Currency Shifts
Although the pound has dropped 2.7% since the election, it is still faring better than the euro. The euro may face more challenges due to tariffs aimed at China, the European Union, and Mexico. Regarding monetary policy, traders see an 80% chance that the Bank of England will cut interest rates again next month. They expect rates could decrease to just above 4% by the end of 2025.
Recent data showed that the UK economy unexpectedly shrank in September, slowing growth to only 0.1% in the third quarter. Investors are now paying attention to October’s inflation figures, which are expected to be 2.2%. They also predict retail sales might decline after three consecutive months of growth.
