UK optimism swatted by BoE member

Market reports
Thanim Islam
  • Risks to UK economy outlined in higher rate environment
  • Risk appetite driving markets

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Higher risk appetite was the call of the day as yields dropped, taking USD weaker across the board and seeing GBP recover. Earlier in the day construction PMIs for the UK were higher as well, adding to yesterday's revised higher services PMI number. But a word of caution on GBP as well. Following on from BoE chief economist Huw Pill comments earlier in the week suggesting rate cuts, BoE member Swati Dhingra was on the wires yesterday outlining that she sees a profound risk to the UK economy should interest rates stay higher for longer. Money market pricing on UK rate cuts were barely unmoved, but there clearly seems to be a dovish shift amongst some members of the BoE.


Market rates

*Daily move - against G10 rates at 7:30am, 07.02.24
** Indicative rates - interbank rates at 7:30am, 07.02.24

Data points


  • GBP: BoE Breedon
  • EUR: ECB Muller

Our thoughts

Risk tone will likely remain the driver of markets, which could well see GBPEUR hit the highs seen towards the end of January, and GBPUSD retrace higher back to an area that was prior support, but now an area of resistance for GBP. There seems to be less optimism of seeing GBPUSD getting back to the highs seen towards the end of the year, with clients lowering their target rates at which to buy USD. EUR buyers continue to target the January highs. Today's trading day will likely pan out to be similar to yesterday, with the broader risk appetite being the main driver, especially after the announcement that Hamas have proposed a three stage 135 day truce with Israel.


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