Megan Greene from the Bank of England spoke at an Atlantic Council meeting about important economic issues. She covered topics like inflation, interest rates worldwide, and risks in the currency market. Greene mentioned that the softening job market makes a wage-price spiral less likely. Current unemployment in the UK has risen to 4.5%. This was predicted and confirms trends in the labor market. Greene pointed out that while we shouldn’t expect rate cuts every quarter, the trend of reducing rates is not over yet.

The British Pound Performance

The British Pound’s performance varied against major currencies. It gained strength against the Euro but had mixed results against currencies like the US Dollar and the Japanese Yen. The article shared market data showing how major currencies changed in value against one another. For the British Pound, it showed increases against some currencies and decreases against others. This information is not an investment recommendation. It’s important to research and assess your own financial decisions due to the risks in the market. There are no specific business ties or endorsements related to this information. The Bank of England suggests that the cycle for rate cuts still has a way to go, but cuts will not happen steadily at each meeting. This cautious approach comes from the belief that the job market is loosening, which lowers the risk of a wage-price spiral. This slow and careful path creates uncertainty, which traders can use to their benefit.

Impact on Currency Pairs

Greene’s view on the job market aligns with recent data. The Office for National Statistics reported that UK unemployment rose to 4.5%, up from 4.2% at the beginning of the year. Additionally, average weekly earnings growth has slowed to 4.9%, down from 5.7% in late 2024, indicating less upward pressure on wages. The slow pace of expected rate cuts suggests limited upward movement for the Pound Sterling (GBP), but a significant drop seems unlikely. This environment is good for options traders who can take advantage of steady movement or spikes in volatility. Strategies such as selling out-of-the-money call options against the US Dollar can help gather premiums, anticipating that the dovish outlook will keep major rallies in check. When examining currency pairs, the Bank of England’s slow approach appears more aggressive compared to the European Central Bank, which faces weaker growth in the Eurozone. This helps explain the strengthening of GBP against the Euro today and supports maintaining a long GBP/EUR position. However, against the US Dollar, the Federal Reserve’s similar slow-cutting policy indicates that the GBP/USD pair might stay within a narrow range in the coming weeks. History shows that the BoE often pauses during easing cycles, like after the 2008 financial crisis, to consider new data before deciding to act again. Upcoming inflation and employment data will be crucial market movers. Be ready for increased volatility around these releases, as any data that challenges the current “slack” narrative could quickly change expectations about the BoE’s approach. Create your live VT Markets account and start trading now.

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