Sterling remained under pressure this morning as investors positioned themselves ahead of the Bank of England’s policy announcement. Markets are currently pricing in a one-in-three chance of an interest rate cut, leaving the pound vulnerable to any surprises.
Adding to the uncertainty, the UK fiscal outlook is weighing on market and investor sentiment. Chancellor Rachel Reeves has hinted at potential tax increases in the upcoming Budget later this month — a move that could dampen growth prospects and further damage confidence in UK assets.
The pound has traded close to multi-month lows as we know, with GBP/USD hovering around 1.30, while GBP/EUR continually struggling to break current levels. Traders remain focused on the BoE’s tone; a decision to hold rates, coupled with a cautious outlook, could offer some much-needed support. On the other hand, any signal of an easing cycle would likely accelerate GBP selling.
Turning out attention to the US, The Dollar held firm as investors flocked to the safe haven asset safety due to mixed US data and subdued risk appetite. The Fed’s policy path remains uncertain, but for now the dollar continues to benefit from its defensive appeal. The U.S Government shutdown has now entered record breaking days and should only benefit the Dollar the further this goes on.
The immediate focus today however turns to the Bank of England’s decision and concluding statement, which could set the tone for sterling for the rest of the year. Markets will also look to the UK Budget on 26 November, which is shaping up as a key event risk for fiscal credibility and growth projections.
In the meantime, sterling’s direction will likely remain tied to shifts in rate expectations and global risk sentiment.
GBP/EUR 1.1349 GBP/USD 1.3072 GBP/AED 4.8032
GBP/AUD 2.0074 GBP/CHF 1.0575 GBP/CAD 1.8431
GBP/NZD 2.3095 EUR/USD 1.1505 GBP/ZAR 22.7148