Pound Sterling consolidates as focus shifts to BoE hearings

The Pound Sterling trades back and forth ahead of several BoE members’ hearings before the Treasury Committee.

Traders expect that the BoE will cut interest rates by 25 bps in December.

Nomura expects the Fed to leave interest rates unchanged in December.

The Pound Sterling (GBP) trades sideways against its major peers on Tuesday with investors focusing on the Monetary Policy Hearings, in which several Bank of England (BoE) policymakers – including Governor Andrew Bailey – will respond to questions before the Treasury Committee regarding the latest decisions on interest rates.

The hearings, which will start at around 10:00 GMT, could provide clues over the interest-rate outlook, a key driver for the Pound Sterling. Apart from Bailey, Deputy Governor Clare Lombardelli and Monetary Policy Committee (MPC) external members Alan Taylor and Catherine Mann will also participate in the hearings. 

Beyond the hearings, investors brace for another key event: the Consumer Price Index (CPI) data for October, which will be published on Wednesday. The inflation data will significantly influence market expectations for the BoE interest rate decision in the December meeting. 

Traders see a roughly 80% that the BoE will cut interest rates again by 25 basis points (bps) to 4.50%, according to Reuters. This would be the second interest rate cut by the BoE in a row and the third in this year.

The headline CPI is expected to rise by 0.5% after remaining flat in September on month. Annual headline inflation is estimated to have accelerated to 2.2% from the prior release of 1.7%. Economists expect the core CPI – which excludes volatile food and energy prices – to grow steadily by 3.2%.

Investors will also pay close attention to the service inflation data, a measure closely tracked by BoE officials when deciding on interest rates.