In a few words, markets are currently readjusting expectations of further GBP rate cuts, with the latest reduction to 4% signifying the fifth rate cut made by the BoE in 2025.
This change in narrative is at least in part thanks to a series of hawkish economic data points, most significantly a major outperformance in services PMI and hotter-than-expected inflation as part of data released last week.
Read more on UK PMIs: UK Services PMI improves, pound continues losing streak
This, especially regarding the latter, might offer the Bank of England an opportunity to pause, or even end easing efforts, should they deem appropriate in their upcoming September decision.
While the recent vote ultimately concluded with a rate reduction, the room was noticeably split, again adding to the rationale that the Bank of England is becoming increasingly hawkish, having already cut several times in 2025.
At least one outcome of the above is immediate support for GBP/USD, which goes double when markets overwhelmingly predict a 25 basis point cut will be the Federal Reserve’s next move on September 17th.