The British pound strengthens against the euro, and the market adjusts downward its expectations of a rate cut by the Bank of England.

Against the backdrop of ongoing US dollar appreciation pressure, the British pound has recently performed strongly against the euro. The latest movements in the currency market show that market participants are reassessing the Bank of England’s monetary policy direction, with a significant downward revision in expectations for rate cuts throughout the year.

Pound Appreciation Drives Exchange Rate Adjustment

The pound rose 0.5% against the US dollar to 1.3569, hitting a new high since September; at the same time, the pound’s rise against the euro also led to adjustments in related currency pairs, with the euro falling 0.5% to 0.8661 against the pound. This round of appreciation reflects investors’ renewed perception of the relative strength of the UK currency.

Central Bank Policy Signals Trigger Expectation Revisions

Recent comments from Megan Greene, a member of the Bank of England’s Monetary Policy Committee, have become a market focus. Greene warned that declining US interest rates could elevate domestic inflation in the UK, changing market expectations for the pace of rate cuts by the central bank. Swap contract data reflect this shift in expectations: traders now anticipate a 36 basis point rate cut by the Bank of England in 2026, significantly down from the recent trading day’s expectation of 41 basis points. This indicates that the market is adjusting its pricing for a relatively hawkish central bank policy environment.