🔥📉 Dovish winds blowing. All eyes on the BoE’s 19 March rate decision — markets price ~40 percent chance of a cut to 3.50 percent. CPI falling toward 2 percent target, but 5.2 percent unemployment clouds the picture. A cut = GBP downside; a hold = steady. Bailey says March is “genuinely open.” Watch this space. 🇬🇧💷
The UK finds itself at a critical inflection point heading into March 2026. Inflation has eased sharply to 3.0 percent — its lowest in nearly a year — and the BoE expects it to hit 2 percent by spring, yet the labour market is deteriorating with unemployment at 5.2 percent, a near 5-year high.
GDP growth has stalled at 0.1 percent for 2 consecutive quarters, though PMI data signals a promising pickup, with the composite index at a 22-month high of 53.9.#
The FTSE 100 has been on a historic run, breaching 10,000 and setting fresh records, while GBP/USD has traded near 1.35 on a weakening dollar.
Gilt yields have eased from their 2025 highs to 4.32 percent as markets price further easing. Starmer’s Labour government faces a make-or-break year, with the Autumn Budget’s 26 billion GBP tax package beginning to take effect alongside energy bill cuts from April.
The central tension for GBP is clear: faster BoE cuts to support a weakening economy would weigh on the currency, but disinflationary progress and improved PMIs could limit downside.
The 19 March MPC meeting and the accompanying CPI print on 25 March will be the next decisive catalysts.
