- The Pound Sterling outperforms its major peers on Tuesday. The British currency strengthens as market expectations for the Bank of England (BoE) to reduce interest rates in November have eased further after the speech from BoE external policy member Megan Greene at the National Association for Business Economics conference.
- Megan Greene, who voted for leaving interest rates unchanged in the last two policy meetings, indicated that the United Kingdom’s (UK) consumption-driven recovery could spurt price pressures again. Greene warned that the return of the headline inflation to the bank’s target of 2% was due to a temporary decline in Oil prices. Also, inflation in the service sector – which is closely tracked by BoE policymakers – at 5.6% is “worrisome,” she said. However, she remained confident that prices are “moving in the right direction,” Bloomberg reported.
- Financial market participants expect the BoE to cut interest rates one more time in the last quarter of the year, most probably in the December meeting. The BoE pivoted to policy normalization with a 25 bps interest rate cut on August 1 but left borrowing rates unchanged on September 19.
- Going forward, the next major trigger for the Pound Sterling will be the BoE Chief Economist Huw Pill’s speech, which is scheduled at 14:00 GMT. Pill’s speech could provide more guidance on the interest rate outlook for the remainder of the year.
- On the economic data front, investors will focus on the revised estimate of S&P Global/CIPS Manufacturing PMI data for September, which will be published at 08:30 GMT. The Manufacturing PMI is estimated to have remained at 51.5, unchanged from the flash estimate.
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