The Bank of England (BoE) will keep the Bank Rate unchanged at 5.25% and the first 25-basis-point cut isn't expected until August, says Kirstine Kundby-Nielsen, FX analyst at Danske Bank.

BoE expected to cut rate in August

“We expect the BoE to keep the Bank Rate unchanged at 5.25% on 20 June, which is in line with consensus and current market pricing. We expect the vote split to be 7-2, with the majority voting for an unchanged decision and Ramsden and Dhingra voting for a cut.”

“Overall, we expect the MPC to stick to its current communication, priming the markets for a forthcoming start to a cutting cycle. We expect the first 25bp cut in August.”

“We expect a muted market reaction but see the balance of risk skewed to a move higher in EUR/GBP as the BoE tends to err on the dovish side, and we see a downside risk to our EUR/GBP forecast of 0.88 in 6-12 months.”