Synopsis:

Danske expects the Bank of England to keep the Bank Rate unchanged at 4.25% at its June 19 meeting. With recent UK data, particularly labor market indicators, showing increasing signs of softening, Danske maintains its view for continued gradual easing in the coming quarters. Market impact on EUR/GBP is expected to be limited.

Key Points:

Policy Hold Expected:

• BoE is expected to keep rates unchanged at 4.25%, consistent with both market pricing and consensus expectations.

Softening Data Supports Cuts:

• Recent economic data has surprised to the downside.

• Labor market indicators show more pronounced cooling, reinforcing the case for further cuts later in the year.

Quarterly Easing Path Intact:

• Danske maintains its view for gradual, quarterly rate cuts beginning in the second half of 2025, supported by a weaker growth outlook and moderating inflation pressures.

Muted Market Reaction:

• EUR/GBP reaction is expected to be limited, as the decision and tone are broadly priced in.

• Danske remains negative on GBP due to the UK’s weaker macro outlook and relatively more dovish central bank trajectory.

Conclusion:

Danske sees no change from the BoE in June but expects a continued easing path as UK labor market conditions soften. While the upcoming decision is unlikely to move markets significantly, the underlying macro trend keeps Danske cautious on GBP going forward.