Bank of England Preview – Quarterly Cuts Amid Elevated Uncertainty

Central Bank

Summary:

We expect the Bank of England (BoE) to keep the Bank Rate unchanged at 4.50% on Thursday 20 March in line with consensus and market pricing.Data has been mixed and amid elevated uncertainty, this warrants a continued signalling of only a gradual approach to monetary policy easing.We expect the reaction in EUR/GBP to be rather muted with risks tilted to the topside.

We expect the Bank of England to keep the Bank Rate unchanged at 4.50% on Thursday 20 March in line with consensus and market pricing. We expect the vote split to be 6-3 with the majority voting for an unchanged decision and Dhingra, Taylor and Mann voting for a cut. Note, this meeting will not include updated projections nor a press conference following the release of the statement.

Overall, we expect the BoE to stick to its previous guidance noting that “a gradual and careful approach to removing monetary policy restraint remains appropriate“. We expect the MPC to highlight heightened uncertainty due to domestic fiscal policy initiatives and trade policy tensions. By extension, we expect them to be in no rush to alter the current guidance. Since the last monetary policy decision in February, data has been mixed. The economy continues to stagnate, the labour market is gradually loosening while price pressures continue to be elevated. The economy ended 2024 on a slightly stronger note than in the MPC’s projection, growing 0.1% q/q in Q4 2024. However, PMI data and monthly GDP estimate for January signals that growth remains muted, increasing the downside risks to the growth outlook. While private sector wage growth was slightly lower than expected at 6.2% in the three months to September (vs BoE forecast of 6.3%) it remains significantly elevated. On the inflation front, inflation was slightly higher than expected in headline terms but still showed broad based easing when looking at the service sector. The reaction to the impending increase in employers’ national insurance contribution from April remains a risk for the labour market.

Bank of England Preview – Quarterly Cuts Amid Elevated Uncertainty_1

BoE call. We expect the BoE to stick to quarterly cuts, leaving the Bank Rate at 3.75% by YE 2025, which is lower than markets are expecting. Markets are pricing around 55bp for the remainder of the year. However, we highlight that the risk is skewed towards a swifter cutting cycle in 2025, given the dovish bias within the MPC.

Market reaction. We expect the market reaction to be rather muted upon announcement with an unchanged decision fully expected by markets and the BoE aiming to keep its options fully open. More broadly, we expect EUR/GBP to move lower in the coming quarters driven by a relatively hawkish BoE, and a growth pickup in the UK relative to the euro area in 2025. The key risks are continued elevated uncertainty, more euro optimism and a more forceful policy easing stance from the BoE.

Source: Danske Bank

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Saif

Economic

Retail and food services sales rose just 0.2% month-on-month (m/m), disappointing expectations for a stronger rebound following January’s contraction. Data revisions also expanded January’s contraction to -1.2% m/m from the initially reported 0.9% decline.

Vehicle and parts sales fell for the second consecutive month, weighing on the headline (-0.4% m/m). Sales at gasoline stations also posted a sizeable decline, falling by 1% from the prior month. Building materials and equipment stores’ sales edged slightly higher (+0.2% m/m), posting the first gain since September 2024.

Sales in the “control group”, which the excludes volatile components above (i.e., gasoline, autos and building supplies) fared much better than the headline, increasing by 1% on the month, fully reversing January’s drop.

Online sales rebounded 2.4% on the month, but sales were mixed across brick-and-mortar retailers. The largest gains were in health & personal care stores (+1.7% m/m). Sales also increased at food and beverage stores (+0.4% m/m) and general merchandise stores (+0.2%). On the other hand, February marked the second consecutive month that sales declined at the clothing and accessories stores (-0.6%) and sporting goods & hobby stores (-0.4% m/m).

Sales at bars and restaurants posted a large decline, falling by 1.5%, extending the disappointing performance in this category to three consecutive months.

Key Iplications

The rebound in the total retail sales was soft, but the gain in core sales was more robust, entirely reversing the January’s pullback which was likely influenced by inclement weather across much of the U.S. Still, the yo-yo like movements in the last couple of months leave core retail sales with little progress, stuck at the same level they were back in December of 2024. As a result, we expect real consumer spending to lose momentum in Q1, expanding by just 1.5% (annualized), less than half its pace in the fourth quarter of 2024.

For the year as whole, consumer spending is expected to be much softer. U.S. consumers are getting nervous about the intensifying trade fight which is fanning flames consumer anxiety about inflation. As a result, households’ confidence rapidly deteriorated in recent months. The University of Michigan’s index of consumer confidence showed year-ahead inflation expectations jumping to 4.9% in March, up from 4.3% in February and 2.8% in December 2024. This is the highest level since November 2022, when core PCE inflation was running north of 5%. Even as the labour market continues to hold up reasonably well and household wealth is still significant, the drop in sentiment will likely manifest in weaker spending over the coming quarters.

Source: Bank Financial Group

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ING

Central Bank

Drama aside, the Bank has – if anything – become more hawkish

Drama is not often synonymous with the Bank of England. But February’s meeting was nothing short of a bombshell. Catherine Mann, who for months had led the opposition to rate cuts, surprised everyone with her vote for a 50bp rate cut. And that posed the question: if the arch-hawk is prepared to vote for faster rate cuts, will the rest of the committee soon follow suit?

For all the excitement, the answer seems to be no. Most officials that have spoken since have struck a much more cautious tone. And looking beyond Mann’s vote, the February meeting had a more hawkish flavour. The statement talked about a “careful approach” to further easing. The new forecasts pointed to higher inflation this year, despite a sharp rise in market rates (which would normally dampen growth and price pressures).

The disagreement boils down to two things. First, Mann believes in a much more activist approach to setting policy than her peers. She was more aggressive on rate hikes, and now takes the same view on cuts. We sympathise with that view; the fixed-rate nature of UK lending (especially mortgages) means that policy changes take longer to feed through than they once did. If you believe the outlook for growth and inflation is shifting, then gradual rate cuts are initially much less effective than they once were.

And that’s the second point: Mann does believe the outlook has materially shifted. In recent comments, she has talked about the risk of “non-linear” falls in employment, in response to hefty tax hikes coming through for employers next month.

Certainly, the vibes surrounding the jobs market have gotten dramatically worse. Survey after survey has pointed to weaker hiring intentions, while talk of layoffs has increased. For now, though, that negativity hasn’t shown up in the hard data. Companies are required to report redundancies to the government via an HR1 notification. These haven’t shown any discernible uptick so far.

Redundancies haven't risen – yet

Bank of England to Hold Rates Against Backdrop of Sticky Inflation_1

Our base case is three more cuts this year

As long as that remains the case, the wider focus at the Bank will stay squarely on inflation. The simple fact is that wage growth is at 6%, while services inflation is bouncing around 5%. That’s an uncomfortable position for the BoE, even if both of those numbers should come lower through this year. Wage growth should gradually tick lower given the jobs market has cooled appreciably over recent months, irrespective of the forthcoming tax hike. Services inflation should be closer to 4%, or perhaps even below, by the summer, on account of more benign annual price hikes this spring.

For now, though, there’s little that’s happened since the February meeting that will have caused officials to shift their position. A rate cut is highly unlikely this week, given the Bank’s well-established pattern of cutting rates once per quarter. And when it comes to the vote split, we suspect we’ll get either a repeat of February’s 7-2 vote in favour of no change (with Dhingra and Mann dissenting, presumably in favour of a 25bp cut), or perhaps a 6-3 (with Alan Taylor joining calls for a cut, having done so back in December).

We expect Bank Rate to fall a bit further than markets are pricing

Bank of England to Hold Rates Against Backdrop of Sticky Inflation_2

Our base case is that the Bank continues on its current course of gradual rate cuts, with moves in May, August and November. We don’t rule out a faster pace though that would require more obvious and abrupt signs of weakening in the jobs market. We doubt the government’s Spring Statement on 26 March, where some spending cuts are widely expected, will dramatically change the story for the Bank.

Markets are still a tad reluctant to bake in those three remaining rate cuts in 2025 fully; 55bp of easing is priced by December. And despite the decent repricing lower in US rates over recent weeks, investors don’t expect rates to go any lower in 2026 or beyond. Markets are pricing a floor for Bank Rate of 3.9%, compared to our own forecast of 3.25%, which we expect to be reached by the summer of 2026.

Source: ING

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Thomas

Economic

U.S. President Donald Trump looks on as military strikes are launched against Yemen's Iran-aligned Houthis over the group's attacks against Red Sea shipping, at an unspecified location in this handout image released March 15, 2025.

White House | Via Reuters

Oil prices rose on Monday after President Donald Trump said the U.S. would hold Iran responsible for any future attack by the Houthis, a militant group in Yemen that has repeatedly launched strikes on commercial shipping.

U.S. crude oil futures rose 40 cents, or 0.6%, to $67.58 per barrel. Global benchmark Brent traded 44 cents, or 0.62%, higher at $71.02 per barrel.

"Every shot fired by the Houthis will be looked upon, from this point forward, as being a shot fired from the weapons and leadership of IRAN," Trump said in a post social media platform Truth Social. "IRAN will be held responsible, and suffer the consequences, and those consequences will be dire!"

This is breaking news. Please refresh for updates.

Source: CNBC

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Justin

Economic

Stocks

Key US indices staged an impressive rebound on Friday, turning the Dow Jones Industrial Average (DJI) up one step away from formally entering correction territory (-10% from the peak). In doing so, the US economy is headed for recession if the theories coined by the index’s founder and first editor of the Wall Street Journal still apply.

In his theory, Charles Dow pointed out that the trend of the industrial index is correct if confirmed by the dynamics of the transport sector. However, since peaking in late November, the DJTA index has lost nearly 20%, accelerating its decline three weeks ago. The rapid decline has led to the formation of a ‘death cross,’ a bearish market signal when the 50-day moving average dips below the 200-day moving average.

The accumulated oversold conditions in equities over the past three weeks suggests a high chance of a rebound, but how soon that rebound will lose strength will depend on monetary policy and incoming data.

The DJI was down as low as 25 on the RSI index last week. This is an oversold area from where a reversal to the upside was forming in October 2023 and September 2022. However, this technique could be broken or confirmed by market reaction to the FOMC meeting later in the week.

It is within Powell and Co’s power to break the mature beginning of the recovery by softening the tone of comments and promising further rate cuts soon. In this case, the market would be in an attractive position for buyers, who could launch a global rally towards new highs above 45000.

However, downside risks are pretty much equivalent. Since Trump’s presidential election victory, Powell has noticeably tightened his tone: tariffs have a pro-inflationary effect and are operating even with expectations. Friday’s jump in inflation expectations to 2.5-year highs recorded by the University of Michigan doesn’t help matters either.

Consolidation and rebound in the indices are quite fragile right now. Without Fed support, the sell-off could quickly take on threatening proportions, triggering a liquidation of long positions and margin calls that could quickly take the index to 36000.

Source: ACTIONFOREX

To stay updated on all economic events of today, please check out our Economic calendar

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Owen Li

Economic

Sales at bars and restaurants posted a large decline, falling by 1.5%, extending the disappointing performance in this category to three consecutive months.

Key Implications

Source: ACTIONFOREX

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Warren Takunda

Cryptocurrency

Bitcoin heads into FOMC week in a cautious mood, with multimonth lows still uncomfortably close.

BTC price action preserves $80,000 support as upside liquidity looks ripe for the taking.

The Fed is the center of attention with a decision due on interest rates and traders eagerly scanning Chair Jerome Powell for dovish signals.

A return to accumulation among Bitcoin top buyers forms grounds for confidence over market stability going forward.

Historical BTC price cycle analysis delivers an impressive $126,000 target for the start of June.

Those looking to “be greedy when others are fearful” should concentrate on $69,000, research concludes.

Bitcoin trader sees $87,000 liquidity grab

A comparatively quiet weekend saw BTC/USD avoid a lasting sell-off into the weekly close, instead only dipping to $82,000 before rebounding.

Data from Cointelegraph Markets Pro and TradingView shows a broad reclaim of the $80,000 mark cementing itself in recent days. Peak 'FUD' Hints at $70K Floor — 5 Things to Know in Bitcoin This Week_1

Peak 'FUD' Hints at $70K Floor — 5 Things to Know in Bitcoin This Week_1

BTC/USD 1-hour chart. Source: Cointelegraph/TradingView

“Not a bad Sunday for Bitcoin,” crypto trader, analyst and entrepreneur Michaël van de Poppe summarized in part of his latest market analysis on X.

“We still have Monday to go, but this looks like we're making a new higher low on Bitcoin before attacking the highs again.” Peak 'FUD' Hints at $70K Floor — 5 Things to Know in Bitcoin This Week_2

Peak 'FUD' Hints at $70K Floor — 5 Things to Know in Bitcoin This Week_2

BTC/USDT 4-hour chart. Source: Michaël van de Poppe/X

Other market participants echoed the sentiment, including those seeing another retest of multimonth lows to take liquidity and “trap” late shorts.

“I think Bitcoin will hit 78k first to grab liquidity before an Upside Breakout,” popular trader Captain Faibik argued in part of his own X content.

“Once the breakout occurs, Bitcoin is likely to reach 109k in the coming weeks (Possibly by mid-April).” Peak 'FUD' Hints at $70K Floor — 5 Things to Know in Bitcoin This Week_3

Peak 'FUD' Hints at $70K Floor — 5 Things to Know in Bitcoin This Week_3

BTC/USDT 1-day chart. Source: Captain Faibik/X

Fellow trader CrypNuevo meanwhile noted that liquidity was skewed mostly to the upside, resulting in key targets for bulls to take.

“The area between $85.4k & $87.1k is the main liquidity zone,” an X thread explained.

“A move up targeting this area in the upcoming week seems more than likely.” Peak 'FUD' Hints at $70K Floor — 5 Things to Know in Bitcoin This Week_4

Bitcoin exchange order book liquidity data. Source: CrypNuevo/X

Fed’s Powell in the spotlight as FOMC week arrives

Bitcoin and risk-asset traders have one macroeconomic event only on their minds this week: the US Federal Reserve’s interest rate decision.

Coming at what commentary calls a “pivotal point in time,” the move by the Federal Open Market Committee (FOMC) will have wide-ranging implications for market sentiment.

On the surface, it appears that few surprises will likely come as a result of the second meeting of 2025 — inflation may be cooling, but Fed officials, including Chair Jerome Powell, maintain a hawkish stance on the economy and financial policy.

Powell has repeatedly stated that he is in no rush to cut rates, leading to almost unanimous market bets that current levels will remain unchanged after FOMC. Peak 'FUD' Hints at $70K Floor — 5 Things to Know in Bitcoin This Week_5

Peak 'FUD' Hints at $70K Floor — 5 Things to Know in Bitcoin This Week_5

The latest estimates from CME Group’s FedWatch Tool see a high probability of cuts coming only in June.

Should Powell strike a more relaxed tone during his accompanying statement and press conference, the mood could easily flip.

“If Powell even whispers ‘QE’ at the next FOMC, markets will move fast,” crypto technical analyst Kyle Doops argued in part of an X post on the topic.

“But knowing Powell, he’ll keep it as vague as possible.” Peak 'FUD' Hints at $70K Floor — 5 Things to Know in Bitcoin This Week_6

Fed target rate probabilities. Source: CME Group

Doops referred to quantitative easing, a byword for liquidity injections and something that historically benefits crypto performance.

Behind the scenes, US M2 money supply is already increasing — a key ingredient for a crypto market rebound.

“M2 money supply rose +3.9% year-over-year in January, the fastest pace in 30 months. This is the 11th straight month of money supply expansion,” trading resource The Kobeissi Letter noted at the weekend.

Kobeissi added that worldwide liquidity is following a similar pattern.

“Meanwhile, global money supply has risen by ~$2.0 trillion over the last 2 months, to its highest since September 2024,” it reported.

“Money supply is expanding again.” Peak 'FUD' Hints at $70K Floor — 5 Things to Know in Bitcoin This Week_7

US M2 money supply chart. Source: The Kobeissi Letter/X

Recent buyers show new “hodling behavior”

Newer Bitcoin investors are showing signs of maturing behavior as the bull market drawdown persists.

The latest findings from onchain analytics platform CryptoQuant reveal accumulation taking over for the older half of the short-term holder (STH) cohort.

STH entities are those who bought BTC up to six months ago. Per CryptoQuant, investors hodling between three and six months are now entering “accumulation” by refusing to succumb to panic selling, despite potentially being underwater on their stack.

“According to the latest data, the percentage of coins held for 3 to 6 months has been rising rapidly, mirroring the accumulation patterns observed during the prolonged correction in the summer of 2024,” contributor ShayanBTC wrote in one of its “Quicktake” blog posts on March 16.

“This trend highlights a hodling behavior, where investors refrain from selling their Bitcoin despite the current market correction.” Peak 'FUD' Hints at $70K Floor — 5 Things to Know in Bitcoin This Week_8

Peak 'FUD' Hints at $70K Floor — 5 Things to Know in Bitcoin This Week_8

Bitcoin realized cap by UTXO age (screenshot). Source: CryptoQuant

An accompanying chart shows Bitcoin’s realized cap split by the age of unspent transaction output (UTXOs). This reflects the total value of coins based on the price at which they last moved, with those dormant for between three and six months rising rapidly.

“Historically, this type of resilience among Bitcoin holders has played a crucial role in forming market bottoms and igniting new uptrends,” the post continues.

“As long-term holders continue accumulating, the available supply in circulation decreases, making Bitcoin more scarce. When demand eventually picks up, this supply squeeze often leads to price surges, pushing Bitcoin toward new record highs.”

As Cointelegraph reported, however, STH buyers from 2025 have exhibited strikingly different reactions to the BTC price drop, selling coins with a combined $100 million loss since the start of February alone.

$126,000 BTC price by June?

Network economist Timothy Peterson’s historically accurate BTC price metric, Lowest Price Forward, recently gave 95% odds of BTC/USD never dropping below $69,000 again.

Now, another calculation sees the potential for new all-time highs by the start of June. Peak 'FUD' Hints at $70K Floor — 5 Things to Know in Bitcoin This Week_9

Peak 'FUD' Hints at $70K Floor — 5 Things to Know in Bitcoin This Week_9

Bitcoin seasonal comparison. Source: Timothy Peterson/X

Comparing BTC price performance since 2015 at the weekend, Peterson described Bitcoin as currently being “near the low end” of what remains a standard range.

The next two months, however, should be critical — April is historically one of the two best months for the Bitcoin bull market.

“Nearly all of Bitcoin's annual performance occurs in 2 months: April and October,” Peterson commented.

“It is entirely possible Bitcoin could reach a new all-time high before June.” Peak 'FUD' Hints at $70K Floor — 5 Things to Know in Bitcoin This Week_10

Bitcoin growth of $100 comparison. Source: Timothy Peterson/X

Further analysis produced a BTC price target of $126,000 as an average level that Bitcoin could still attain within the next two-and-a-half months.

$70,000 marks a key “FUD” watershed

When it comes to BTC price predictions, social media analysis is giving research firm Santiment cause to pay attention to two levels in particular.

In its latest investigation, Santiment tied $69,000 and $100,000 to extremes in market outlook.

“Over the past month, we have not seen Bitcoin's market value fall below $70K OR rise above $100K,” it summarized on X.

“That means looking at the crowd's social predictions of $100K is a great gauge for FOMO. Historically, markets move the opposite direction of the crowd's expectations.” Peak 'FUD' Hints at $70K Floor — 5 Things to Know in Bitcoin This Week_11

Peak 'FUD' Hints at $70K Floor — 5 Things to Know in Bitcoin This Week_11

Bitcoin social media data. Source: Santiment/X

Accompanying data examined social media mentions of various BTC price levels.

“This is why clusters of blue bars (representing $10K-$69K $BTC predictions) so reliably foreshadow a reversal (or buy signal), especially while markets are moving down and the crowd is getting fearful,” Santiment explained. Peak 'FUD' Hints at $70K Floor — 5 Things to Know in Bitcoin This Week_12

Peak 'FUD' Hints at $70K Floor — 5 Things to Know in Bitcoin This Week_12

Crypto Fear & Greed Index (screenshot). Source: Alternative.me

The Crypto Fear & Greed Index stood at 32/100 on March 17, out of its “extreme fear” bracket and at its highest levels since Feb. 24.

Source: Cointelegraph

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Bank of England Preview – Quarterly Cuts Amid Elevated Uncertainty

Source: Danske Bank

US: Retail Sales Edged Higher in February

Key Iplications

Source: Bank Financial Group

Bank of England to Hold Rates Against Backdrop of Sticky Inflation

Drama aside, the Bank has – if anything – become more hawkish

Redundancies haven't risen – yet

Our base case is three more cuts this year

We expect Bank Rate to fall a bit further than markets are pricing

Source: ING

Oil Rises As Trump Says Iran Will Be Held Responsible For Any Future Houthi Attacks

White House | Via Reuters

Source: CNBC

Dow Jones: Rebound Or Rally? The Fed Holds The Key

Source: ACTIONFOREX

US: Retail Sales Edged Higher In February

Key Implications

Source: ACTIONFOREX

Peak 'FUD' Hints at $70K Floor — 5 Things to Know in Bitcoin This Week

Bitcoin trader sees $87,000 liquidity grab

BTC/USD 1-hour chart. Source: Cointelegraph/TradingView

BTC/USDT 4-hour chart. Source: Michaël van de Poppe/X

BTC/USDT 1-day chart. Source: Captain Faibik/X

Bitcoin exchange order book liquidity data. Source: CrypNuevo/X

Fed’s Powell in the spotlight as FOMC week arrives

Fed target rate probabilities. Source: CME Group

US M2 money supply chart. Source: The Kobeissi Letter/X

Recent buyers show new “hodling behavior”

Bitcoin realized cap by UTXO age (screenshot). Source: CryptoQuant

$126,000 BTC price by June?

Bitcoin seasonal comparison. Source: Timothy Peterson/X

Bitcoin growth of $100 comparison. Source: Timothy Peterson/X

$70,000 marks a key “FUD” watershed

Bitcoin social media data. Source: Santiment/X

Crypto Fear & Greed Index (screenshot). Source: Alternative.me

Source: Cointelegraph

Risk Disclosure