BOE leaves bank rate unchanged at 3.75% in April meeting, as expected

What the desk is arguing

The desk posits that the BOE's decision to keep the bank rate unchanged at 3.75% is a reflection of a balanced approach to current economic challenges. Per the full note source, the central bank acknowledges the limitations of monetary policy in addressing global energy price fluctuations while remaining vigilant against potential second-round inflation effects.

Market expectations have shifted notably, with traders now pricing in only about 50% odds for a rate hike in June, down from approximately 70% prior to the meeting. This adjustment underscores the market's recognition of the BOE's cautious tone and the prevailing economic headwinds.

Where it sits in our coverage

Our consensus target for GBP/USD is 1.075, with a range from 1.04 to 1.12. Notably, jpmorgan is aligned with our view, targeting 1.10 for March 2026, while bofa holds a contrary position with a target of 1.04 for the same tenor.

This perspective aligns with the cautious sentiment expressed by the BOE, diverging from more aggressive rate hike expectations seen in some quarters. Our target sits comfortably within the lower end of the consensus range, reflecting a more conservative outlook on the currency pair.

How other firms see it

Firms such as citi and goldman share a similar cautious outlook, emphasizing the need for careful monitoring of inflation dynamics before further tightening. Conversely, deutsche and bofa advocate for a more aggressive approach, suggesting that immediate action may be warranted given inflationary pressures.

The trajectory of GBP/USD will likely mirror the BOE's rate path, while developments in energy prices and inflation indicators will be crucial in shaping market sentiment moving forward.

What the calendar says

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