Sterling Slightly Falls Ahead of Bank of England Policy Announcement
Sterling has experienced a slight decrease against the dollar as traders prepare for the Bank of England’s policy announcement, which is scheduled for Thursday. The market is also keeping a close eye on the U.S. Federal Reserve’s meeting later in the day.
At 1118 GMT, the pound was down 0.17% against the dollar, trading at $1.2133. Fiona Cincotta, a senior financial markets analyst at City Index, explained that GBP/USD is remaining steady following modest losses in the previous session as traders await the Federal Reserve’s interest rate decision.
Market expectations are that the Fed will maintain its current policy. In addition, manufacturing and jobs data from the U.S. will be closely watched. The yen is also a topic of interest, as it is currently at its lowest level against the dollar in a year, raising the possibility of intervention.
British mortgage lender Nationwide announced that house prices unexpectedly rose by nearly 1% in October. However, this increase is attributed more to a shortage of homes for sale rather than a market turnaround, which has been impacted by rising borrowing costs.
Nicholas Rees, an FX market analyst at Monex, noted that the better-than-expected housing data gave a small boost to sentiment for the pound against the euro. The common currency fell 0.15% against the pound, reaching 86.89 pence. Rees cautioned that this improvement may overstate the current conditions of the UK property market, as there has been a slowdown in activity due to potential mortgage borrowers being squeezed out.
On Wednesday, a survey revealed that Britain’s factories had a worse October than previously estimated, indicating a downturn in the economy. This challenging economic background may prompt policymakers to maintain the current interest rates at 5.25%, according to Cincotta.
Money markets indicate a 92% probability that the Bank of England will leave rates unchanged in its upcoming meeting on Thursday. Economists at RBC also anticipate that the Monetary Policy Committee will maintain rates and consider the September hike as the last in the current cycle of rate increases. The economists from RBC explained that since the last monetary policy rate in August, the data has supported the decision to hold, citing a slowdown in economic activity, easing inflation, and signs of a weakening labor market.
The British currency experienced three consecutive months of losses from August to October, with a total decrease of 5.5% during that period.
More detail via Yahoo! Finance here… ( Image via Yahoo! Finance )