One thing about the market—it tends to race ahead of itself. The dollar’s been sinking across the board, with major currencies, especially the yen, reaping the benefits. Traders are doubling down on bets that the Federal Reserve will deliver a bigger-than-expected rate cut this week.
The pound, meanwhile, has climbed over 70 pips this morning, after closing slightly down last week. All eyes are on this week’s UK inflation data and the Bank of England’s upcoming meeting. By 11:00 GMT, cable (GBP/USD) was trading at $1.3196.
The pound’s resilience is surprising many, with the general sentiment being that the Bank of England will likely be cautious on rate cuts, especially with core inflation expected to rise. The BoE is anticipated to keep rates unchanged this week after trimming by 25 basis points last month. However, Monday’s futures markets implied a 38% chance of another 25-basis-point cut, up from 20% on Friday.
Wednesday’s inflation figures will be pivotal ahead of the BoE’s decision, especially after last week’s data from Britain’s Office for National Statistics revealed that the economy stagnated unexpectedly in July.
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