Daily digest market movers: Pound Sterling edges down while US Dollar exhibits strength
- The Pound Sterling refreshes a five-month low near the round-level support of 1.2300 as investors see the Bank of England (BoE) pivoting to interest rate cuts sooner than the Fed. Last week, BoE Deputy Governor Dave Ramsden said that United Kingdom inflation will decline faster than expected and will return to the 2% target in May.
- Dave Ramsden said: “Over the last few months, I have become more confident in the evidence that risks to persistence in domestic inflation pressures are receding, helped by improved inflation dynamics," Reuters reported. He added that inflation might prove weaker than BoE’s latest projections.
- Ramsden’s soft guidance on the inflation outlook has prompted expectations that the BoE will start reducing interest rates earlier than previously expected. LSEG's (BOEWATCH) now prices 28 basis points (bps) of rate cuts in August and 56 bps in December versus 22 bps and 51 bps, respectively, at Friday's close, Reuters reported.
- Market expectations for the BoE’s May policy meeting will be guided by commentaries from policymakers, as inflation data for the same month will be released after the interest rate decision. In Tuesday’s session, the speeches from BoE policymakers Jonathan Haskel and Huw Pill will be in focus.
- In March’s monetary policy meeting, Haskel, who remained a hawk, surprisingly voted for keeping interest rates unchanged at 5.25%. In early April, Haskel commented that rate cuts should be "a long way off." He added that the decline in the headline inflation is good news but the BoE cares more about the persistent and theerlying inflation, the Financial Times reported. High inflation in the UK economy has been majorly driven by persistent inflation in the service sector, which is fuelled by strong wage growth. In March, the annual Service inflation decelerated slightly to 6.0% from 6.1%.
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