The pound’s modest recovery this morning is welcome after a bruising few days, but it masks a deeper shift in market expectations. Financial markets now price just one Bank of England rate cut for the whole of 2026 – down from at least two at the start of the week. That dramatic repricing reflects the energy shock’s potential to keep inflation elevated for longer than anyone had hoped.
Today’s gilt auction is the immediate focus. With yields still elevated after this week’s spike, the Treasury needs to sell £3.5 billion of bonds into a jittery market. A smooth sale would settle nerves; a weak one could put further pressure on borrowing costs and, by extension, sterling. The next Bank of England decision on 19 March looms large.
GBP/USD: the past year
