Could sterling rebound after the Bank of England decision and updated forecasts?
The Bank of England concludes its two-day meeting today with the interest rate vote announcement. A rate cut appears unlikely, despite September’s headline CPI remaining below 4%. Recent UK data has shown signs of resilience, including stronger-than-expected September retail sales, August industrial production, and improved October consumer confidence alongside PMI readings for manufacturing and services.
Given the narrow margin in August’s rate cut vote and recent MPC commentary, a no-change decision seems probable for most members. However, this meeting also includes updated forecasts for growth, inflation, and unemployment. The accompanying press conference may offer clues about December’s decision, though much will depend on data released in the interim. If the Governor signals that a December cut remains in the balance, or if forecasts point to greater economic resilience, sterling could see a short-term lift. That risk cannot be ignored.
Euro Area retail sales unlikely to provide meaningful support for the euro
September retail sales across the Euro Area are expected to show subdued but positive activity. While recent indicators have been more encouraging, concerns about tariff-related weakness have not materialised in the data. However, German industrial production disappointed this morning, rising just 1.3% month-on-month versus expectations of 3%. This modest recovery, following August’s sharp decline, highlights the challenge of revitalising Germany’s economy. The euro has firmed slightly against the dollar, though this appears driven more by dollar softness than euro strength.
Strong US figures yesterday gives way to Fed speakers today
Yesterday’s US services ISM index exceeded expectations, and the ADP employment survey reported stronger job growth than forecast. These releases triggered a sell-off in US Treasuries and a modest dollar rally, particularly against the euro and yen, while sterling and the Canadian dollar regained some ground after Tuesday’s losses. Today’s US data calendar is light, but speeches from several Fed officials, including Williams, Barr, Hammack, Waller, Paulson, and Musalem, may attract attention. Whether these remarks provide meaningful insight into December’s policy outlook remains uncertain. The ongoing government shutdown adds complexity, with the FAA warning that air traffic could fall by up to 10% due to staffing shortages.
Author- Neil Parker
With years of hands-on experience navigating the dynamic landscape of global currencies, we specialise in providing actionable insights, tailored strategies, and cutting-edge analysis for…
