Trading
Sterling rises after UK inflation data and ahead of Fed
Published by Jessica Weisman-Pitts
Posted on September 18, 2024
3 min readLast updated: January 29, 2026
Global Banking & Finance Review®
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Published by Jessica Weisman-Pitts
Posted on September 18, 2024
3 min readLast updated: January 29, 2026
By Linda Pasquini
LONDON (Reuters) – The British pound rose against the dollar on Wednesday after UK inflation data boosted the market view that the Bank of England will keep interest rates steady on Thursday, in contrast with an expected start to the U.S. policy easing cycle later on Wednesday.
Sterling gained 0.49% to $1.3227, a session high, recouping Tuesday’s losses.
The Bank of England is widely anticipated to keep interest rates at 5% on Thursday, after official figures showed inflation stood at an annual rate of 2.2% in August, unchanged from July, despite a pick up in price growth in the services sector.
Meanwhile, industry data showed British supermarket sales growth slowed over the last month as consumers trimmed spending after their summer holidays.
“Looking through the Bank of England’s range of underlying services measures, we still see some marginal improvement in the data despite the uptick in the headline services measure, with underlying inflation continuing to ease. This is good news for the MPC,” said Sanjay Raja, Chief UK Economist at Deutsche Bank, referring to the BoE’s Monetary Policy Committee.
That said, today’s data won’t be enough to trigger a surprise rate cut tomorrow,” Raja added.
Futures markets now imply a smaller chance of a quarter point cut, at 26%, versus about 38% at the beginning of the week.
“Sterling looks pretty strong,” said ING currency strategist Francesco Pesole, adding euro-sterling was not likely to jump back to 85 pence for now.
The euro slipped 0.25% against the pound to 84.235 pence.
We are still expecting a bit of a weaker year end for sterling,” if the BoE starts moving a bit faster with rate cuts, Pesole said.
Looking past the MPC decision on Thursday, markets are wagering on 50 basis points of cuts in total from now until the end of the year.
The BoE cut rates by a quarter of a point last month.
Slow steady progress in reducing inflation “ought to still justify a gradualist approach” in easing monetary policy, analysts at Lloyds Bank wrote in a note.
“Arguably what the Fed does and says today matters at least as much for the November MPC outcome as what the MPC says tomorrow,” they said.
The Federal Reserve is expected to make its first interest rate cut in more than four years at 1800 GMT, with markets pricing a 65% probability of a 50 basis point cut. FEDWATCH
The European Central Bank cut rates by 25 basis points last week.
(Reporting by Linda Pasquini; Editing by Mark Potter)
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured annually and can impact economic policy decisions.
The Bank of England is the central bank of the United Kingdom, responsible for issuing currency, maintaining monetary stability, and overseeing the financial system.
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage. They are influenced by central bank policies and economic conditions.
A monetary policy committee is a group within a central bank that makes decisions regarding interest rates and other monetary policies to achieve economic objectives like controlling inflation.
Foreign exchange, or forex, refers to the global marketplace for trading national currencies against one another. It is essential for international trade and investment.
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