The pound comes under pressure yesterday after BoE chief economist Huw Pill commented that there will be a “sharp further fall” in inflation in October, and hinted that we could see rate cuts by the middle of next year. Money markets are now pricing in 0.50% worth of rate cuts by September next year.

This comes as a surprise to traders and investor, whose expectations of a potential 0.25% hike being in the pipeline. The accompanying statement following the Bank of England meeting last week where Bailey signalled that rates will need to stay high for an extended period of time, and pushed back against the suggestion of any rate cuts. A sharp change of pace in a matter of days from Bank of England officials. 

After a brief moment of weakness, the US Dollar appears to be back on the front foot. Last week saw the Federal Reserve suggest they were done with hiking interest rates for the US and Jerome Powell downplayed the dot plot that suggested another 0.25% rate hike before the end of the year. Friday gave the Dollar another blow as both non-farm payrolls and services PMI’s posted lower than expected numbers heading into the weekend.

GBPUSD currently trades at one of the best prices we’ve seen since mid-September. GBPEUR remains range bound as both economies continue to struggle to get a foothold for growth and show any kind of resilience. 

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Written by: Ryan Cutts