Will the BoE cut in June?
According to markets at the close of trading yesterday, a June rate cut from the Bank of England is likely. However, priced at just a 58% probability, you can see just how open the ground for the Bank of England’s June meeting remains. For some time now June has been seen as a key month in the Bank’s calendar. There remain some obstacles ahead of that decision that may well tip the scales in either decision to adjust rates lower or hold them steady for another month. Inflation data due for release this week will be one of the key variables analysts in the market and at the Bank alike use to appraise the option of a June rate cut.
The consensus forecast shows headline inflation expected to clock in at just 2.1% on Wednesday. From this headline inflation figure, embarking upon an interest rate easing cycle may be seen as either a no-brainer or well overdue. However, when looking at the core inflation rate, which is expected to record at 3.6% year-on-year, we see the overweight impact that changes in Ofgem’s energy price cap during the observation period are having. That is still not in itself a reason not to start a policy loosening cycle given that much of the initial inflation spike two years ago was commodity price driven. However, what the Bank may be looking more closely at will be services inflation and consumer demand.
As we have discussed before, services inflation may command the attention of policy makers as it shows how input labour prices and consumer demand are performing. This gives a better insight into the dynamics behind price level inflation versus a surface level snapshot. To an extent inflation within services prices strips out some of the volatility created by commodity-exposed items within the calculation. This element of UK inflation data due to be published prior to European market open tomorrow morning could therefore hold the key as to whether we see a June rate cut from the Bank of England. Thanks to a risk-on environment and a weakening Dollar, GBP looks partially overbought against the Euro and US Dollar. Tomorrow’s data could present a challenge to GBP strength if inflation figures present in line or below expectations.
Discussion and Analysis by Charles Porter
Click Here to Subscribe to the SGM-FX Newsletter
Related Insights
Daily Brief – Missing haven
Charles Porter
Tue 7 Apr 2026
Missing haven At the start of the year, the Franc had performed well as a safehaven. As a result of political and economic developments in Japan, the Yen was not abiding by its usual safehaven form. Therefore, defensive plays within FX only had two credible places to go: the US Dollar or the Swiss Franc. […]
Daily Brief – Battle of the banks
Charles Porter
Thu 2 Apr 2026
Battle of the banks Market volatility continues amidst unclear messaging from both sides of the conflict in Iran. The President’s position has continued to flit between seemingly concrete positions of absolutely tangible progress and bombing the nation back ‘to the Stone Ages’. Since the start of the war, smarter money has acknowledged that predicting the […]
Daily Brief – Questioning Truth
Charles Porter
Tue 24 Mar 2026
Questioning Truth Adopting the same handle as his now rather redundant X account, @realDonaldTrump shocked markets yesterday using his own social media platform, Truth Social. During Trump 1.0, the legitimacy of a President using an unofficial X, then Twitter, account was questioned. Now under Trump 2.0, it’s seldom questioned when he is the majority shareholder […]
