GBP is retracting elegantly. Overview for 02.03.2023

The British pound against the US dollar is declining. The current quote is 1.2000.

The head of the BoE Andrew Bailey voiced yesterday that nothing had been decided firmly yet in terms of interest rate increases in Britain.

At the conference, Bailey tried to warn investors of either excessive confidence about the end of interest rate increases or the BoE’s readiness to go on lifting it. The idea was to make the capital market think that the situation was under full control but the market interpreted this signal ambiguously.

As a result, an increase in the interest rate by 25 base points on 23 March now looks a little bit less probable. Yet it remains the most realistic scenario.

By the end of the year, the rate might reach 4.75%.

In fact, such a prominent reaction to Bailey’s comment has some base underneath. Investors are nervous about Brexit, namely about the trade agreement not yet figured out with the Northern Ireland. Overall tension makes reactions to minor signals so bright.