The Pound Sterling (GBP) remains under pressure on Tuesday, trading slightly lower against major currencies as investors turn cautious ahead of Wednesday’s release of the United Kingdom’s (UK) Consumer Price Index (CPI) data for October.
Market participants are closely watching the inflation figures for clues on whether the Bank of England (BoE) might restart its monetary-easing cycle at the December policy meeting.
Economists expect headline inflation to ease to 3.6% year-on-year, down from 3.8% in September. Core CPI — which excludes food, energy, alcohol, and tobacco — is also expected to cool slightly to 3.4%, compared with 3.5% previously. On a monthly basis, headline CPI is forecast to rise 0.4% after staying unchanged last month.
If the data confirms easing price pressures, it could strengthen market expectations of a BoE rate cut in December. However, even if inflation remains sticky, it may not significantly reduce dovish expectations given the UK’s soft labour market and sluggish economic growth. Last week’s September jobs data showed the unemployment rate rising to 5%, reinforcing concerns over weakening economic momentum.
Later this week, traders will also look at the UK Retail Sales figures for October and the S&P Global PMI readings for November, both due on Friday.
Daily Market Overview: Pound Sterling edges lower against the US Dollar
The Pound dips toward 1.3145 against the US Dollar (USD) during Tuesday’s European session. The GBP/USD pair is likely to trade in a tight range as investors await the US Nonfarm Payrolls (NFP) report for September, due Thursday.
The US Dollar Index (DXY) is slightly higher near 99.60 at press time.
This week’s NFP data is especially important, as major US economic releases have been paused for over six weeks due to the government shutdown. Traders are looking to the employment numbers for fresh insight into the labour market. The August NFP report showed a significant hiring slowdown, which pushed expectations for additional Federal Reserve (Fed) rate cuts this year.
Since that August release, the Fed has delivered two rate cuts, totaling 50 basis points, bringing the benchmark range to 3.75%–4.00%.
However, Fed officials have recently dialed back aggressive easing expectations, warning that reducing rates too quickly could reduce downward pressure on inflation.
Fed Vice Chair Philip Jefferson noted on Monday, as reported by Reuters, that policy has moved closer to a neutral level that “neither restricts nor stimulates the economy.” He added that further cuts could undermine efforts to control inflation.
