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Mar 22 - 08:55 AM

GBP/USD - COMMENT-If BoE Cuts Rates In May, GBP/USD Could Sink To 1.20

By Rob Howard  —  Mar 22 - 06:40 AM

March 22 (Reuters) - Cable might tumble towards 1.20, a level it hasn't threatened since October last year, if the Bank of England opts to cut interest rates at its next meeting in May.

The possibility of a BoE rate reduction as early as May has risen courtesy of a dovish steer from Governor Andrew Bailey, who said "all our meetings are in play" when the FT asked him if all the upcoming Monetary Policy Committee meetings were live when it comes to possible rate cuts.

Bailey's guidance followed a dovish shift in the MPC rate vote on Thursday, when hawks Catherine Mann and Jonathan Haskel ditched their votes for a hike.

Markets currently see a 24% chance of the BoE cutting rates on May 9 - a week after UK local elections, when Prime Minister Rishi Sunak's governing Conservative Party is expected to do badly. 0#BOEWATCH

GBP/USD fell to 1.2576 on Friday, its lowest level since Feb.
16, courtesy of Bailey.
1.2803 was Thursday's high - before the Swiss National Bank's surprise rate cut, and the BoE's dovish tilt.

Related comment: nL2N3FY0UP

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Source:
Refinitiv IFR Research/Market Commentary

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