Interest rate cuts priced in early?

Trading

Sterling hit new record lows against the euro yesterday pressured by expectations and worries about an economic slowdown that will prompt the Bank of England to cut interest rates, this was compounded by the Nationwide Consumer confidence figures falling to their lowest in 4 years.
Some reports have speculated on an aggressive 50 basis point cut at today’s BoE meeting, however, this would appear to be an unlikely outcome, with most analysts anticipating a 25 basis point cut.

In contrast to BoE rate cuts, the European Central Bank is expected to hold rates at 4% and signalling that it is not ready to start loosening policy any time soon.

"The UK has clearly softened a lot more than Europe and I guess that's why we'll see the Bank of England cut rates while the ECB will be hawkish ... At least for now it looks like the trend (in euro/sterling) is well and truly intact," said Geoff Kendrick, currency strategist at Westpac.
Keep in close contact with your account manager throughout the day as key data releases can have a major impact on your currency requirement.

Defensive Darling

Chancellor Alistair Darling was quick to state that a move by the International Monetary Fund to downgrade growth forecasts was "not surprising" in the current climate but stressed economic fundamentals were sound.

"The IMF has downgraded every country's growth forecasts," Darling told BBC radio on Wednesday. "It's not surprising."

The IMF said losses from the subprime crisis would hit $945 billion, while economic growth this year will be only 0.5 percent in the United States and 1.6 percent in the United Kingdom (the weakest rate for more than a decade and significantly weaker than the government's own forecast for around 2.0 percent).

The IMF's new estimates reflect the fact that the United States and United Kingdom are among the most vulnerable to the ongoing credit turmoil, with falls in house prices and growth largely dependent on consumer spending and the financial sectors.

Those of you holding off in the vain hope that sterling will recover in the coming weeks may now be wishing you had ‘bitten the bullet’ and secured your currency. Once again throughout the early part of the week sterling has performed badly losing nearly 1% against the Euro (or a cost of over £1500 on a €200,000 property). A similar slide has been experienced against the USD (loss of 0.75%) the AUD (loss of 1.1%) and the NZD (loss of 0.65%). For those of you continuing to hold it may be a wise move to re-assess the current situation and your target levels - the less risk averse may wish to secure your requirement before the UK Interest Rate decision at 12:00 today.