BoE: Market brings forward rate cut bets – MUFG

💡 DMK Insight

UK rate markets are now pricing in a potential Bank of England cut next month, and here’s why that matters: The dovish tone from Governor Bailey and MPC member Mann is shifting trader sentiment, suggesting that the central bank is ready to pivot if economic data supports it. This could lead to increased volatility in GBP pairs, especially if traders react to upcoming inflation or employment data. If the BoE does cut rates, we could see GBP/USD test key support levels, particularly around recent lows. Watch for the 1.20 level as a critical threshold; a break below could trigger further selling pressure. On the flip side, if data comes in stronger than expected, it could lead to a quick reversal in sentiment. Traders should keep an eye on market reactions to economic releases over the next few weeks, as these will be pivotal in shaping expectations around the BoE’s next move. The market’s current positioning suggests that any unexpected strength in the UK economy could lead to a short squeeze in GBP shorts, making this a high-stakes situation for both bulls and bears.