Pound Sterling stays on the offensive ahead of the Bank of England’s policy announcement.
The Pound Sterling (GBP) holds gains on Thursday ahead of the Bank of England (BoE) interest rate announcement. Which is likely to keep rates unchanged at 5.25%. The Pound recovered significantly on Wednesday as market sentiment strengthened. Following the Federal Reserve’s (Fed) decision to keep interest rates unchanged in the 5.25%-5.50% range.
The Bank of England is expected to keep interest rates unchanged, but to keep the possibility of further rate hikes alive.
The UK economy is looking for a firm. Due to sluggish retail demand, bad company statistics. A precarious housing sector, and a weakening labor market, the economy is on shaky ground. These reasons may sway BoE officials to leave interest rates constant. As further rate hikes could impair the economy’s outlook and push it into recession.
A steady monetary policy decision by the BoE could prevent additional damage to the UK economy. But it would also increase the dangers to consumer inflation. Despite an unusually tight rate-hiking campaign, inflation in the country remains above 6%. Meanwhile, rising Middle East tensions pose new challenges. To progress toward 2% inflation. As the likelihood of reduced oil supplies might drive up energy prices once more.
Daily Market Move:Pound Sterling capitalizes on risk-on mood maintains gains fueled by an improving market sentiment and optimism that the Federal Reserve will stop raising interest rates.
The GBPUSD pair is bracing itself for a tumultuous session. As the Bank of England (BoE) announces its monetary policy decision at 12:00 GMT.
As concerns about the UK economy’s possible recession grow. The Bank of England is largely likely to maintain interest rates at 5.25%.
This would be the second time in a row that the Bank of England held interest rates constant. Despite the possibility of higher consumer inflation.
According to Barclays, the BoE’s Monetary Policy Committee will vote 1-6-2, with policymaker Swati Dhingra voting. For a rate drop and Jonathan Haskel and Katherine Mann voting for a 25 basis point (bps) rate hike.
Sarah Breeden, the new Deputy Governor. Who has taken over for Jon Cunliffe, is expected to vote to keep interest rates unchanged.
A number of factors, including job losses, weakening corporate activity. Dropping consumer spending, declining consumer confidence, and a sluggish housing market, justify the BoE’s decision to keep interest rates steady.
As inflation is more than three times the desired rate of 2%, Bank of England Governor Andrew Bailey is expected to keep interest rate hike expectations alive.
The UK economy’s headline and core inflation rates are 6.7% and 6.1%, respectively, powered in part by solid wage growth.
The risks to consumer inflation have risen as a result of rising Middle East tensions, which could drive up energy prices.
The Bank of England is also anticipated to issue new inflation estimates. . Investors will examine to see if the bank’s inflation forecast matches Prime Minister Rishi Sunak’s commitment to reduce inflation to 5.4% by the end of the year.
UK business optimism fell to a ten-month low as firms trimmed disproportionately on labor and inventories.
As the British economy struggles with increased interest rates, investors will continue to focus on inflation estimates for 2024 and growth prospects.
The central bank’s inflation target could be raised to 3%, according to growing conjecture.
In his remarks, Andrew Bailey expressed confidence that price pressures will fall dramatically in October and denied any plans to raise the inflation target.
In terms of economic data, S&P Global stated on Wednesday that the Manufacturing PMI fell to 44.8 in October, compared to expectations and the preliminary reading of 45.2.
According to S&P Global, “risks to the outlook remain skewed to the downside.” Business optimism has declined. Manufacturers’ intensified belt-tightening prompted decreases in employment, purchases, and inventory to a ten-month low.”
Meanwhile, the US dollar is falling substantially as the likelihood. That the Fed will stop raising interest rates grows. Aside from a consistent Fed policy. The US Dollar has been pulled down by dismal ADP private payrolls. And disappointing ISM Manufacturing PMI data.
ADP stated that companies hired 113K job seekers in the United States. Which was below than predictions of 150K. But much better than the previous reading of 89K. The ISM published the Manufacturing PMI at 46.7, which was lower than expected and lower than the previous reading of 49.0.
