Daily digest market movers Pound Sterling consolidates amid uncertainty over BoE interest rate path

The Pound Sterling trades broadly sideways against its major peers on Tuesday, with investors looking for fresh cues about the Bank of England’s (BoE) likely interest rate path. Most BoE policymakers, including Governor Andrew Bailey, have supported a gradual policy-easing approach, citing persistent concerns over price pressures.

BoE Deputy Governor Clare Lombardelli said in a speech at King's Business School on Monday, “I support a gradual removal of monetary policy restriction.” Lombardelli warned about risks of inflation remaining higher than the bank’s forecast, where wage growth normalizes at 3.5%-4% and the Consumer Price Index (CPI) around 3% rather than 2%. 

When asked about the economic performance in the context of weak preliminary S&P Global/CIPS Purchasing Managers Index (PMI) data for November, Lombardelli said, “Flash PMIs for November may suggest some slowing in the United Kingdom (UK) economy, but I don’t take a strong signal from a single release.”

On the contrary, BoE external policy member Swati Dhingra appears to support a less gradual interest rate cut approach as she doesn't see the UK as an outlier for inflation among advanced economies. Dhingra added that the policy is weighing on investment.

Currently, traders expect the BoE to leave interest rates unchanged at 4.75% in the December policy meeting.