The BoE’s Monetary Policy Committee voted 6-3 to keep interest rates unchanged in its policy meeting yesterday. The pause was fully priced in, with the benchmark rate remaining at 5.25%, as the central bank falls in line with the Fed and ECB holding rates at the last meeting, suggesting that all three may have reached the peak in rates. Markets are now suggesting that the next move in UK rates will likely be down, however Governor Andrew Bailey insisted that it is “much too early to be thinking about rate cuts.” Bailey continues with the ‘higher for longer’ rhetoric saying that restrictive policy is likely needed for an extended period as the committee continues to battle inflation which remains considerably above the 2% target. October’s CPI inflation print which is due on 15 November will be next key data release and should give markets further clues on whether interest rates have peaked. The pound tried to rally but once again failed to trigger buying interest with GBPUSD continually bumping into stubborn selling interest above 1.22.
The dollar index looks set to record its largest weekly drop in over three months, as markets increase odds that the Federal Reserve is done with interest rate hikes. EURUSD inched higher but seems uncomfortable towards the top of its recent range with markets reluctant to build long positions ahead of key US data later today. Non-farm payrolls are released this afternoon and come after a softer ADP Private payroll release and initial claims which came in a touch higher than expected. Markets are forecasting an October NFP release of 200k, with the unemployment report to come in at 3.8%. This follows a bumper September release at 336k, so markets will pay close attention to any revisions to see if last months hiring surge was temporary.
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