Sterling edged closer to a two-month low against the U.S. dollar on Thursday, after falling the day before when low inflation spurred bets on a rate cut from the Bank of England.
Sterling was down 0.1% at $1.29815 after crossing the key $1.30 threshold on Wednesday when data showed UK inflation fell to its lowest level since April 2021, and more significantly than economists had predicted.
“Sterling bears are now testing… a few pips below the 1.30 mark, to reverse the April-September positive trend and send the pair into a medium-term bearish consolidation zone,” a said Swissquote Bank analyst Ipek Ozkardeskaya.
Traders now see there as an 85% chance the Bank of England will cut rates by 25 basis points at its next meeting in November, up from 80% before the data. [BOEWATCH]
Expectations that persistent inflation would lead the BoE to cut rates more gradually than its U.S. and European counterparts helped send the pound to a two-and-a-half-year high against the greenback at the end of September.
However, strong US data, which challenged the Fed’s rate cut forecasts, and tensions in the Middle East led to a relative revaluation of currency pairs, boosting the dollar and weighing on the pound. sterling.
Investors are eagerly awaiting UK Finance Minister Rachel Reeves’ first budget, due to be presented on October 30, which includes tax increases and spending cuts worth around £40 billion (£52 billion). dollars), two government sources told Reuters.
Against the euro, sterling was little changed at 83.595 pence.
A quarter-point cut in interest rates from the European Central Bank is almost entirely expected at its meeting on Thursday, while remarks from President Christine Lagarde will be analyzed later for clues on how the ECB plans to do so in the future.
Canada
