In a relatively quiet week for the currency markets, all eyes were on the Pound as the Bank of England’s upcoming interest rate decision emerged as the primary focal point. Another significant event was the release of the UK’s GDP readings.

With a bank holiday in the UK this week, the market activity took a while to pick up momentum. The first major event of the week was the RBA’s interest rate decision. However, the hold at 4.35% was largely expected, resulting in limited market movement.

Subsequently, attention shifted to the Bank of England’s interest rate decision. Similar to the RBA’s decision, a hold was widely anticipated, and indeed, the majority voted to maintain rates at 5.25%. Nonetheless, two members dissented and voted for a cut (0-2-7), indicating a shift from the previous vote split of 0-1-8. This divergence caused some volatility in the market.

Following the decision, Governor Andrew Bailey commented on future policy, suggesting that the Bank of England could potentially implement rate cuts faster than previously anticipated. Whether this implies a larger cut than the anticipated 25 basis points or more frequent cuts remains to be seen. Nevertheless, the likelihood of a cut at the next decision, and if not, in July, has increased. Surprisingly, this did not trigger the significant sell-off that was expected, and the Pound maintained its strength relatively well.

In contrast, this morning’s GDP figures released in the UK revealed a rebounding economy, with figures coming in at 0.4% month-on-month, surpassing the forecast of 0.1% and showing improvement from the previous reading of 0.2%. Consequently, the Pound gained traction, reaching its highest level of the week.

Looking ahead, in another relatively quiet week, all eyes will be on the US as they prepare to release a series of inflationary figures, notably CPI and Retail Sales, on Wednesday. This suggests a potential for US dominance next week.