Commerzbank’s Antje Praefcke argues that weak UK employment data and still-elevated inflation leave the Bank of England inclined to cut rates again, with March remaining a live option after a close February decision. She adds that political turmoil around the prime minister compounds the negative backdrop, suggesting the Pound is likely to stay under downward pressure for now.

Weak labour data, cut risks weigh

"This week's data should make it easier for the Bank of England (BoE) to cut its key interest rate again, as the employment trend remains weak."

"Although the market has only slightly adjusted its interest rate expectations, it still sees a slightly higher chance of an interest rate cut in March given the weak labor market data."

"This appears plausible, as the decision to hold rates steady in early February was extremely close, and the door was left wide open for a cut in March."

"And so, to make matters worse for the pound, in addition to the political turmoil surrounding the prime minister, the BoE is likely to remain on course for interest rate cuts, even though inflation remains uncomfortably high and is not likely to fall as quickly as the BoE had hoped."

"All in all, the pound is therefore likely to remain under downward pressure for the time being."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)