Pound sterling consolidates after recovering marginally on Thursday, with BoE’s Mann stating that services inflation must fall further before future rate cuts can be implemented.
On Friday, the Pound Sterling (GBP) maintained its Thursday recovery against its major peers, while it appears to be on track for its fourth straight week of losses against the US Dollar. Nonetheless, the near-term outlook of the British pound appears to have improved due to various tailwinds.
aggressive words from the Bank of England (BoE) Monetary Policy Committee (MPC) member Catherine Mann, and a sustained expansion in economic activity shown by the flash United Kingdom (UK) S&P Global/CIPS Purchasing Managers Index (PMI) data for October.
In a panel discussion on the sidelines of International Monetary Fund (IMF) meetings, Catherine Mann, an outspoken hawk, praised September’s soft inflation figures but underlined the need for further slowing. Despite a drop in service inflation below 5%, Mann stated that inflation in the services sector still has a long way to go before meeting the bank’s 2% target.
When asked about her current opinion on interest rates, Mann said: “It would be premature to cut rates if there is structural persistence in the relationship between wages and prices.” formation.”
Despite Mann’s hawkish statements, traders continue to expect the BoE to cut interest rates further in November.
UK flash PMI data, business activity expanded in October, but at a slower pace.
Meanwhile, Thursday’s preliminary PMI survey showed that the UK’s economic activity increased in both the manufacturing and service sectors, but at a slower rate than September. Even though total increase was less than expected, it was still higher than that recorded in the United States (US) and the Eurozone, where manufacturing production continues to shrink.
Daily Market movers: Pound Sterling hangs onto recent gains against the US dollar.
In Friday’s London session, the pound sterling held gains near 1.2970 against the US dollar (USD). The GBP/USD pair hangs onto Thursday’s rally, while the US Dollar stays on the defensive. Following a corrective move, the US Dollar Index (DXY) is trading near 104.10.
The outlook for the US Dollar remains optimistic as traders price in former President Donald Trump’s victory ahead of the presidential election on November 5, which traders believe will benefit the US Dollar. Market players foresee greater tariffs and reduced taxes under a Trump government, which might have a negative impact on trading partners’ currencies.
Kamala Harris wins the presidential election, the US Dollar may experience a severe repricing.
However, if current Vice President Kamala Harris wins the presidential election, the US Dollar may experience a severe repricing, according to Standard Chartered.
Meanwhile, persistent assumption that the Federal Reserve (Fed) will maintain a gradual interest rate lowering path may limit any US Dollar correction. According to According to the CME FedWatch tool, the Fed is likely to decrease interest rates again in November and December, although at its typical rate of 25 basis points (bps). In September, the Fed began its policy-easing cycle with a 50-bps interest rate drop.
On the economic front, investors will pay special attention to the September US Durable Goods Orders data, which will be released at 12:30 GMT. Economists estimate new orders for durable goods to have fallen by 1% after holding flat in August.
