London: Interest rates cut is expected today. There’s a general consensus that the Bank of England would do this to ease the cost of borrowing in their midday announcement. How far are they willing to go?

There mixed picture of the economy from recent economic numbers released have forced the hands of the MPC members. Last month we saw a synchronized rates cut with other global players on the heat of the October markets collapse. A climb down from the 5% level to 4.5% and it is  expected today that a further cut of half a point is required to reduce borrowing costs on bank loan.

Whilst the market anticipated this, no one really know what would happen. There are certain groups calling for bigger rates cut of 1 percent point as the UK economy grinds its way into possibly the lowest Christmas sales periods in years.

We considered this move to be very unlikely. Over the years we know the Bank of England would want to leave room for future manoeuvre and they wouldn’t want to negate that principle now.

However, from a currency trading perspective we shall be positioning ourselves to trade depending on the content of the report being delivered. If this cut exceeds 0.5% this could put some pressure on the pound sterling related pair and crosses heading south.

We shall be paying a close attention as the day unfolds. Have a great day.

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