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The Bank of England (BoE) will announce its latest interest rate decision on Thursday, with the outcome set to drive volatility in the pound.
At the time of writing, Sterling is still on the back foot following last week's selloff as anxiety over the autumn budget continues to grow. GBP/EUR remains close to a near two-and-a-half-year low, while GBP/USD has struck a fresh six-month low.
What is the BoE expected to do?
The BoE is broadly expected to leave interest rates unchanged at this week's meeting, with UK inflation still almost double the bank's 2% target.
However, markets see a one-in-three chance that the bank could cut rates by 25 basis points, with some analysts suggesting that the decision may be more finely balanced than expected.
How could this impact GBP?
If the bank holds rates steady, the pound could enjoy support. That said, investors will also be sensitive to the BoE's forward guidance, with signals that a December rate cut is on the cards potentially dragging on GBP.
On the other hand, a surprise rate cut could sink the pound.
Either way, we expect to see some volatility in GBP as markets digest the decision, vote split, and accompanying commentary, and adjust their bets for future rate cuts in response.
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