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2025-12-16 16:59:09
[Bank of England Decision Preview: Dovish Rate Cut, Hawkish Guidance? The Sterling's Rebound Scenario] ⑴ Convera strategist George Vessey points out that if the Bank of England cuts rates as expected on Thursday, but its stance on the future path of rate cuts is more cautious than the market anticipates, the pound may rise. ⑵ This unexpected situation could manifest as a very close vote in favor of the rate cut, or some policymakers voting against it. ⑶ Another possibility is that the monetary policy statement hints at limited room for further rate cuts. ⑷ In this scenario, investors will be forced to reassess the pace of this easing cycle, thereby suppressing expectations of significant easing. ⑸ The correction in market expectations could drive a short-term rebound in the pound and UK government bond yields. ⑹ The key to trading logic lies in the difference between what the central bank "does" and "says," and the hawkishness of the forward guidance may dominate short-term market movements more than the rate cut itself.
