- The Pound Sterling exhibits a strong performance against its major peers in the European trading hours on Tuesday. The British currency trades firm on expectations that the policy-easing cycle from the Bank of England (BoE) will be slower than that of other central banks.
- Despite a sharp slowdown in price pressures in the UK’s service sector, a closely watched inflation gauge by BoE policymakers, the drop is still insufficient to compel officials to cut interest rates aggressively. Services inflation decelerated to 5.2% in July from 5.7% in June. However, easing services inflation has opened doors for BoE sequential interest rate cuts. Currently, markets have attached a 37% probability of such action, Reuters reported.
- For meaningful cues on the interest-rate path, investors will focus on the BoE Governor Andrew Bailey’s speech at the JH Symposium on Friday. Investors will keenly focus on what he says about the wage growth outlook and how far inflationary pressures could increase if they reaccelerate.
- Before Bailey’s speech, investors will look at the UK preliminary S&P PMI data for August, which will be published on Thursday. Economists expect the flash Manufacturing PMI to steady at 52.1, while activity in the service sector is seen improving to 52.8 from the prior release of 52.5
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