Megan Greene from the Bank of England addressed various topics at a meeting hosted by the Atlantic Council. She discussed inflation dynamics, global interest rates, and currency market risks, noting that labour market slack diminishes the likelihood of a wage-price spiral.

Current UK unemployment rises align with projections, indicating anticipated trends in the labour market. Greene asserted that although rate cuts should not happen every quarter, the cycle of rate reductions has not concluded.

The British Pound Performance

The British Pound showed varying performances against major currencies. It strengthened against the Euro while having mixed results against others, such as the US Dollar and the Japanese Yen.

Market data presented included percentage changes of major currencies against each other. For the British Pound, fluctuations were mapped against currencies like the US Dollar, Euro, and others, with noticeable gains against some and losses against others.

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The Bank of England is telling us that while the rate-cutting cycle has more to go, we should not expect a steady pace of cuts at every meeting. This cautious approach is driven by a belief that the labor market is loosening, reducing the risk of a wage-price spiral. This signal for a slow, data-dependent easing path introduces uncertainty, which we can use to our advantage.

Impact on Currency Pairs

This view on the labor market is supported by the latest data we’ve seen. The Office for National Statistics reported earlier this month that UK unemployment rose to 4.5%, a noticeable increase from the 4.2% level we saw at the start of the year. We’ve also observed average weekly earnings growth slow to 4.9%, down from the 5.7% figures of late 2024, confirming there is less pressure on wages.

The slow pace of expected cuts suggests the Pound Sterling’s (GBP) upward potential is likely limited, but a complete collapse is also unlikely. This environment is ideal for options traders who can capitalize on either range-bound behavior or spikes in volatility. We should consider strategies like selling out-of-the-money call options against the US Dollar to collect premium, betting that the overall dovish stance will cap any major rallies.

Looking at currency pairs, the BoE’s patient dovishness appears more hawkish than the European Central Bank’s stance, which is grappling with weaker Eurozone growth. This explains why we see GBP strengthening against the Euro today and supports maintaining a long GBP/EUR position. Against the US Dollar, however, the Federal Reserve’s similar slow-cutting policy suggests the GBP/USD pair may remain in a tight range in the coming weeks.

Historically, we have seen the BoE pause during easing cycles, such as the period following the 2008 financial crisis, to assess incoming data before acting again. This means that upcoming inflation and employment figures will be critical market-moving events. We should be prepared for heightened volatility around those releases, as any data that challenges the “slack” narrative could force a rapid repricing of the BoE’s path.

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