HSBC analyzes the implications of the Bank of England’s (BoE) recent rate cut on the British pound (GBP). The report notes that the BoE’s ongoing easing cycle may lead to the GBP underperforming against other currencies like the AUD and NZD, which are expected to see rate increases.
BoE cuts rates, GBP faces challenges
“The Bank of England (BoE) cut its policy rate by 25bp to 3.75% on 18 December, marking the sixth cut in the current easing cycle.”
“The meeting’s tone was rather hawkish, as the guidance indicated that ‘judgements around further policy easing will become a closer call.'”
“As the BoE is likely to continue to lower rates in 2026, the GBP will probably underperform against other G10 currencies whose policy rates are already at neutral levels or are set to rise, such as the AUD and NZD.”
Source: https://www.fxstreet.com/news/gbp-boes-easing-cycle-weighs-on-currency-hsbc-202512221041
