Sterling Rises Amid BoE Inflation Concerns
Sterling traded firmer against most major peers on Monday, rising 0.13% to about $1.3256 in European dealing, while underperforming against the yen. Support came from Bank of England rhetoric pointing to persistent inflation pressures. Deputy Governor Dave Ramsden’s FXS Speechtracker reading was 8.4/10 versus a 7.1/10 historic baseline, and he pointed to upside inflation risks from energy, weather and AI-linked supply chains, alongside indirect effects via food prices and potential second-round dynamics. Ramsden had voted to keep Bank Rate unchanged at 3.75% at this month’s meeting.
Market Expectations and Technical Indicators
Governor Andrew Bailey also flagged upside inflation risks, with an FXS Speechtracker score of 8.2 compared with a 6.3 historic average, and warned that prolonged high energy prices could complicate a no-hike stance. Brown Brothers Harriman said markets are pricing about 100 basis points of BoE tightening over the next 12 months to 4.75%, while HSBC cited pricing of around 100bp by July 2027. In the US, the dollar steadied ahead of August PCE inflation and September non-farm payrolls. Technically, GBP/USD was around 1.3251, below the 20-day EMA at 1.3388, with RSI at 29.8. Sterling’s share of global FX turnover was 12% in 2022, averaging $630bn a day. Key pairs account for 11% (GBP/USD), 3% (GBP/JPY) and 2% (EUR/GBP), with the BoE’s inflation aim around 2%.
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