BOE rate cut prospects recede Markets await UK data Sterling fell in European trade on Wednesday against a basket of major rivals away from 29-month highs against the dollar on profit-taking.

The pound was massively boosted after recent bullish remarks by Bank of England Governor Andrew Bailey in Jackson Hall.

The remarks hurt the odds of UK interest rate cuts in September.

The Price

The GBP/USD pair fell 0.3% today to $1.3217, with a session-high at $1.3264.

The pair closed up 0.55% on Tuesday, marking 29-month highs at $1.3266.

Bailey

Bank of England Governor Andrew Bailey said it remains too early to announce victory over inflation in the UK, indicating a more persistent bullish stance on policies.

The remarks are contradictory to his Fed counterpart Jerome Powell, which used the Jackson Hall platform to confirm a September rate cut.

Bailey has cautioned that inflation might rise once again by the end of the year, posing risks.

UK Rates

Following Baileys speech, the odds of a BOE interest rate cut in September stood at just 30%, and at 50% for a September rate cut.

US Rates

According to the Fedwatch tool, the odds of a 0.5% Fed rate cut in September stood at 38%, and at 62% for a 0.25% rate cut.

Markets are expecting 100 basis points of US rate cuts this year.

Rate Gap

The current UK-US rate gap stands at 50 basis points in favor of the US, and will likely shrink to 25 basis points at least in September, underpinning the pounds standing against the dollar.