Sterling Gains as Focus Turns to BoE, Inflation Data Looms

Here’s this week’s overview of the Euro and Sterling:

Sterling

Sterling closed up 0.1% at 1.313 against USD on Friday. Now attention turns to UK inflation data and the Bank of England meeting. The BoE is expected to keep rates unchanged at 5% this week, with markets pricing an 80% chance of no change following a 25 bps cut last month.

Key UK inflation data is due Wednesday, a day before the BoE’s policy announcement. Recent data showed the UK economy stagnated in July, missing the expected 0.2% growth and pushing the pound to its lowest since August 20th. Investors predict the BoE will shift to rate cuts from November, lowering rates possibly to 3% by September 2025.

Euro

The Euro declined by 0.1% against the dollar last week and ended the week trading at 1.107. The ECB cut the deposit facility rate by 25 bps to 3.5% to ease monetary policy restrictions, reflecting an updated inflation outlook.

In addition, the interest rates on the main refinancing operations and the marginal lending facility were lowered to 3.65% and 3.90% respectively, starting from September 18th. Euro dynamics in the coming week will likely depend almost entirely on the Fed interest rate decision with little market moving data set to be released out of the Eurozone.