Daily Market View 03-11-2025

GDP-

From calm to calamity, GBP staggers into this week thoroughly on the backfoot, but with a potential trick up its sleeve when the Bank of England meets to decide whether there will be any movement in the UK base rate.

Current market positioning suggests a 30% chance of cut come Thursday, but even this seems to hard given the actual state of play.

Inflation has paused for the last two months, but remains nearly 2x the BoE's target at 3.8%. The economy is buckling under the weight of rates and taxes, with the taxes picture only likely to get worse following this month's budget.

The likely upcoming tax hikes and spending cuts should have a disinflationary impact, but the BoE doesn't like to pre-empt and so will be happy to sit on its hands on Thursday. 

The Government does have some good news to cling to ahead of the budget on the 26th, that being the best performance in UK bonds since November 2023. Bond yields fell to their lowest since the very tail end of last year, meaning practically, public borrowing is cheaper. 

This silver lining only comes as part of a very dark cloud, with this movement indicating investors renewed confidence that the UK economy will remain subdued for the foreseeable future, weighed down by taxes and spending cuts. This will in turn act as a disinflationary influence, protecting the real value of credit for investors. 

None of this spells great news for GBP in the long term, but the BoE could temporarily give the Pound a lift should they decline to cut on Thursday.

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