Coming up: BOE's rate decision week

2 May

Coming up: BOE's rate decision week

Morgan Stanley has asserted that the Bank of England might still opt for an interest rate cut in the coming week, a stance that stands out amidst dwindling market confidence in such a move. Morgan Stanley’s opinion diverges notably from the consensus, which suggests an initial rate cut by the BOE in September.

Backing Morgan Stanley's perspective is the decline in U.K. inflation to 3.2% in March from the previous month's 3.4%, although it fell short of analysts' projections of 3.1%.

Jens Eisenschmidt, Morgan Stanley’s chief economist, is adamant that rate reductions are on the horizon for both the U.K. and the ECB, while the Fed might adopt a more cautious approach for now.

Meanwhile, the European Central Bank, which hinted at an impending rate adjustment last week, has cited escalating tensions in the Middle East as potential obstacles to these plans. Perhaps these same concerns weigh on the BOE?

Technically, buyers of GBP/USD struggled to maintain levels above the resistance at the 200-day moving average, approximately at 1.2550. This scenario could potentially lead to a test of the recent cycle low observed at 1.2299. Conversely, if buyers manage to reclaim the 1.2500 level, they may challenge the 50-day moving average at 1.2612, followed by the April high at 1.2708.