Key Moments
- The Bank of England held its policy rate at 3.75% but signaled a lower threshold for additional easing.
- GBP/USD recovered part of its earlier decline following the decision and rising UK political uncertainty.
- Brown Brothers Harriman analysts see potential for GBP/USD to move toward its 200-day moving average near 1.3430 as rate expectations shift.
BOE Decision and Policy Guidance Shift
Brown Brothers Harriman (BBH) analysts report that GBP/USD has retraced a portion of its previous losses after the Bank of England (BOE) delivered what they characterize as a dovish hold, alongside growing UK political uncertainty.
As noted by the analysts, the BOE left its benchmark interest rate unchanged at 3.75%. At the same time, the central bank made its policy stance more accommodative by easing the conditions for future rate cuts. This was done through changes to its forward guidance and by revising its macroeconomic projections, including lower inflation forecasts and higher unemployment projections.
Market Reaction and BOE Communication
According to BBH, the Pound had come under pressure after the combination of the BOE decision and political developments, but then staged a partial recovery in GBP/USD.
The analysts highlight the impact of changes in the BOE’s communication on the outlook for policy easing:
“GBP/USD clawed back some of yesterday’s losses triggered by the double whammy of heightened UK political uncertainty and a surprisingly dovish BOE hold. As was widely expected, the BOE left the policy rate unchanged at 3.75%. However, the bar for more easing has been lowered:”
“Second, the BOE tweaked its cautious easing guidance by scrapping reference to “a gradual downward path” to the Bank Rate. That suggests the BOE could cut sooner rather than later. Finally, the BOE slashed its inflation and raised its unemployment rate projections.”
BBH Outlook for GBP/USD and Rate Expectations
BBH analysts see further downside potential for the Pound as markets reassess the BOE path. They point to technical and rate-market signals that, in their view, could guide the next leg in GBP/USD.
“In our view, GBP/USD has room to test its 200-day moving average around 1.3430 as UK rate expectations adjust lower. Swaps market bet for a BOE March rate cut jumped to nearly 70% yesterday from just under 20%.”
Key Metrics and Market Levels
| Indicator | Detail |
|---|---|
| BOE policy rate | 3.75% |
| GBP/USD reference level | 200-day moving average around 1.3430 |
| Swaps-implied probability of BOE March rate cut | Jumped to nearly 70% from just under 20% |





