October Pound Sterling Forecast – Will the pound Fall?

Pound Sterling Lower on UK Inflation Data

One of the key talking points today is this morning’s UK Inflation data which has shown a 6.7% year-on-year reading. This is slightly higher than expected but matches last month’s YoY figure.

The important Core Inflation number has dropped from 6.2% to 6.1%, but there probably isn’t enough in this data to suggest any major changes from the expectations the Bank of England will pause at their next meeting.

Expectations for the headline YoY reading were for a drop from 6.7% to 6.5%. The next Bank of England decision is 2nd November.

Sterling suffered across the board yesterday after wage data showed the jobs market is cooling.

This essentially means there is less likely to be Inflationary pressures from wages, which means less pressure on the Bank of England to raise rates ahead.

Next week, we will essentially have all of the key pieces of data that the BoE uses to determine Interest Rates. That is wage growth, this morning’s inflation piece, and labour market data.

In terms of further data this week for the UK, we have the latest UK Retail Sales data on Friday. Expectations are for a small contraction in the sector, as the cost of living continues to bite and the warmer weather saw consumers delay purchases of warmer clothes.

What will move Exchange Rates today?

In terms of the US dollar, we had some important US economic news yesterday with the latest US Retail Sales data, which increased by 0.7%, more than expected as households stepped up purchases stateside.

Data for August was also revised higher, reflecting increasing underlying strength in the US economy.

This saw the yield on short-term treasuries rise to their highest level in 17 years which reflects the ongoing expectations of ‘higher for longer’ interest rates in the US.

Goldman Sachs has now increased its GDP estimate for 3rd quarter in the US by 0.3% to 4%, which would be the fastest pace of US economic growth since 2021.

Today could see some Euro volatility as we get the latest EZ CORE Inflation data at 10 am, the expectation is for a reading of 4.5%.

Christine Lagarde will also be speaking around this time, and of course, her comments on how the ECB plans to tackle Inflation, but also promote economic growth could prove market-moving.

So key talking points for us today are UK inflation, EZ inflation, Christine Lagarde speech, and Fed speakers this afternoon.

For more information on what might move your exchange rate ahead, please contact me Jonathan Watson by emailing [email protected]

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