BOE Governor Andrew Bailey talked about the UK’s economy, noting that pay growth is slower than expected. This ties into wider concerns about the economy. He also pointed out that weak consumer spending is affecting growth predictions. Businesses are delaying investment decisions, which adds to the economic uncertainty.

Trust In Powell’s Integrity

Bailey didn’t discuss the US situation with Trump and Powell, but he trusts Powell’s integrity. He mentioned that tariff levels have stabilized at higher rates than before. On the neutral interest rate, committee opinions range from 2% to 4%, with no clear agreement. Bailey hinted that changes to monetary policy should be cautious since the economic outlook has stayed mostly the same since May. The recent vote was close, at five to four, indicating a slight lean toward raising rates. However, we might see rate cuts by the end of the year, depending on future data.

Weakening Of The Pound

Pay growth has not met expectations. The latest data from the Office for National Statistics (ONS) for July 2025 showed annual wage growth slowing to 3.9%, reinforcing a cautious outlook. Traders might consider buying SONIA futures, expecting that the market will shift towards a higher chance of a rate cut by year-end. This dovish view suggests the pound may face challenges in the upcoming weeks, especially if other central banks stay firm. The GBP/USD pair has dropped from around 1.27 to 1.24 over the past month as the market factors in potential policy differences. Traders could consider shorting the pound against the dollar or buying put options on GBP/USD to prepare for more weakness. While the delay in business investment is concerning, lower interest rates could help support UK stocks. The latest CBI Industrial Trends Survey from July 2025 indicated weak investment plans. However, lower rates typically boost stock values compared to bonds. Thus, going long on FTSE 100 futures could be a smart strategy to capitalize on possible gains from monetary easing. The close five-to-four vote shows a sharp division, creating uncertainty about the timing of the next policy move. This division could lead to greater volatility in UK gilts and the pound as each new data release is carefully analyzed. Traders expecting significant market fluctuations, rather than a specific trend, might want to consider volatility strategies like option straddles on short-sterling futures ahead of the next meeting in September. Create your live VT Markets account and start trading now.

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