Pound near seven-month lows ahead of UK interest rate decision

Pound (GBPUSD=X, GBPEUR=X)

The pound edged higher against the dollar on Thursday morning after touching a seven-month low overnight, as investors awaited the Bank of England’s latest interest rate decision.

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1.3079

+0.0028

+(0.21%)

As of 9:22:54 AM GMT. Market Open. GBPUSD=XGBPEUR=X

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Sterling was up 0.1% against the greenback, trading at $1.3063, while slipping by the same margin versus the euro, at €1.1342, at the time of writing.

Antonio Ruggiero, senior market analyst at Convera, believes sterling remains technically oversold, but said: "Yet fresh dovish signals from the BoE today could validate further downside, keeping momentum stretched and positioning skewed."

Markets currently assign just a 25% probability that the Monetary Policy Committee will lower rates from the current 4%, though expectations for a cut over the next two meetings have climbed to around 65%.

Attention will turn to Bank of England governor Andrew Bailey’s comments at a press conference following the decision, with investors looking for clues about the timing of the first rate reduction.

Andrew Wishart, senior UK economist at Berenberg, described the vote as a “close call” but predicted the central bank would “hold by a margin of six votes to three.”

Read more: London lacks direction as Bank of England set to make tricky interest rate decision

The decision comes as chancellor Rachel Reeves prepares to deliver her autumn budget later this month, in which she is expected to announce tax increases to address a £22bn shortfall in the public finances. Reeves is also anticipated to breach her own fiscal guidelines, which include not raising taxes on working people and avoiding borrowing to fund day-to-day spending.

Analysts said the bank was likely to proceed cautiously amid fiscal uncertainty and signs of slowing economic momentum.

Gold (GC=F)

Gold prices rose above the $4,000 mark on Thursday as the US dollar eased from a four-month high, high hit in the previous session, offering support to the precious metal.

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4,021.90

+29.00

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As of 4:13:25 AM EST. Market Open. Advanced Chart

Gold futures (GC=F) rose 0.7% to $4,020.20 per ounce, while spot gold rose 0.9% to $4,015.18 an ounce, at the time of writing.

The US dollar index (DX-Y.NYB), which tracks the greenback against a basket of six major currencies, was down 0.2% at 99.99. A weaker dollar makes gold (GC=F) cheaper for investors holding other currencies.

The gains followed a US ADP report on Wednesday showing the private sector added 42,000 jobs in October, well above the 22,000 expected, tempering expectations of a Federal Reserve rate cut in December.

Read more: Bank of England braced for tough call on interest rates

“The dollar has nudged a bit lower...which has made the task easier for gold (GC=F) in terms of gaining traction to the upside,” said Tim Waterer, chief market analyst at KCM Trade.

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Markets now see a 63% chance of a Fed rate cut in December, down from more than 90% last week.

“Gold (GC=F) did rather go against the grain (yesterday) by rising despite the stronger US macro data because traders haven't lost sight of the fact that the current government shutdown has been the longest one yet,” Waterer added.

Oil (BZ=F, CL=F)

Oil prices recovered in early European trading on Thursday, reversing part of the previous session’s losses as fears of oversupply eased.

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64.11

+0.59

+(0.93%)

As of 4:13:28 AM EST. Market Open. BZ=FCL=F

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Brent crude futures (BZ=F) were flat at $64.05 per barrel at the time of writing, as were the West Texas Intermediate futures (CL=F), at $60.59 a barrel.

Analysts at Haitong Securities said OPEC+’s plan to refrain from further output increases in the first quarter of next year had “partly eased the risk of market oversaturation.”

However, concerns about weaker oil (BZ=F, CL=F) demand continue to weigh on sentiment.

Despite Thursday’s rebound, analysts remain cautious. JPMorgan (JPM) noted that global oil (BZ=F, CL=F) demand has risen 850,000 barrels per day year-to-date, falling short of earlier expectations of 900,000 bpd, while high-frequency indicators point to subdued US consumption due to weaker travel and shipping activity.

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In equities, the FTSE 100 (^FTSE) was muted on Thursday morning, trading at 9,711 points, as traders await the Bank of England's split decision. For more details on market movements, check our live coverage here.

Read more:

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