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Goldman Sachs has revised its forecast for the Bank of England (BoE) to delay rate cuts until Q2 2024, citing persistent energy-driven inflation risks. The U.S. investment bank previously anticipated a rate cut in Q1 2024 but now attributes the delay to higher-than-expected energy prices, which are pushing up headline inflation. This shift reflects concerns that energy costs, influenced by global supply dynamics and geopolitical tensions, could undermine the BoE’s progress in curbing inflation. For forex markets, the revised outlook increases uncertainty around GBP/USD and other European currency pairs. Traders may anticipate a weaker pound if the BoE remains dovish longer than expected, while equity markets in the UK and Europe could face volatility due to prolonged higher interest rates. Central bank policy divergence between the BoE and other major banks, such as the Fed or ECB, could also widen currency spreads. Investors should monitor upcoming inflation data and BoE policy statements for clarity. Energy price trends, particularly oil and gas, will remain critical. For MENA investors, the delay in rate cuts could affect hedging strategies for energy-linked assets and influence cross-border capital flows into European markets.
