Sterling falls as merchants eye BOE coin flip later within the day

The losses are coming in fast in the last one hour, with GBP/USD falling from 1.2845 to a low of 1.2790 on the day. This is a move tied mostly to the pound, with EUR/GBP also now up 0.4% to 0.8450. It’s all about the BOE decision later in the day and this seems to be positioning flows in anticipation of that.

The decision is going to be more of a coin flip and traders had earlier priced in something more to that extent as well.

The odds of a 25 bps rate cut priced in were at ~58% earlier but are now at ~62% to start the session. I shared some comments earlier:

“The central bank is likely to cut the bank rate at the balance, but expectations are for the votes to be either 5-4 or 6-3 in favour of a rate cut. The likely dissenters are Pill, Haskel, Mann, and possibly Greene.

“Naturally, if the BOE doesn’t move with a rate cut today, the decision will be a dovish hold surely. But how will markets take to that?

“Currently, traders are pricing in a ~58% probability of a rate cut. So, therein lies the risk for the pound. It’s pretty much a 50-50 call based on the odds. As such, any decision will result in quite decent price movement as markets readjust their rates pricing.”