BoE “We do not need to raise rates to fight inflation”
Daily Currency Update
Sterling has fallen back below this week. While much of the move can clearly be attributed to the rebound in the dollar, we have also seen an element of GBP weakness following comments from Bank of England members. Chief Economist Huw Pill said on Monday that the MPC could begin cutting interest rates in mid-2024, albeit that rates will probably not return to their 2010s levels.This morning Bank of England Chief Economist Huw Pill said in a presentation: “We do not need to raise rates to bear down on inflation,”
Clearly, the Bank of England remains stuck between a rock and a hard place, as elevated inflation and sky-high wages on the one hand are counteracted by a very fragile economy on the other.
Key Movers
In Europe, concerns surrounding the possibility of a technical recession in 2023 were not helped by Tuesday’s German industrial production data. Output in the sector sank by 1.4% in September, the fourth consecutive contraction and the largest downturn since June.The latest German PMI numbers were revised modestly upwards on Monday, albeit the Euro Area composite index remained stuck at a near three-year low. This has done nothing to dispel expectations that a recession could be on the way in the second half of the year after last week’s Q3 GDP report showed a modest downturn in activity.
Ahead of speeches from ECB President Lagarde on both today and Friday. Lagarde is expected to touch on the state of the Eurozone economy during the latter, with any comments that pertain to the possibility of a recession this year likely to be greeted negatively by investors.
Expected Ranges
- GBP/USD: 1.22694 - 1.23086 ▲
- GBP/EUR: 1.14674 - 1.14994 ▲
- GBP/AUD: 1.91322 - 1.92147 ▲
- EUR/USD: 1.06936 - 1.07157 ▲