BERLIN (BE Markets Desk): The pound edged lower against the U.S. dollar on Tuesday as markets awaited comments from senior Bank of England officials that could offer fresh clues about the central bank’s approach to inflation and interest rates.
Sterling was trading at $1.3529, down 0.12% on the day.
Bank of England Governor Andrew Bailey, Deputy Governor Dave Ramsden and Monetary Policy Committee members Megan Greene and Alan Taylor are due to appear before lawmakers on the Treasury Select Committee at 1315 GMT.
Their comments come as investors assess the outlook for interest rates amid renewed pressure from energy prices and uncertainty over the path of inflation. Markets broadly expect the Bank of England to leave its benchmark rate at 3.75% at its meeting next week, but recent developments have increased attention on the possibility of dissent within the rate-setting committee.
Oil prices have climbed toward $100 a barrel, while a surprise vote by a policymaker in July to support a rate increase has added to expectations of a potentially divided committee.
Barclays economists said they expect a 6-3 vote to keep rates unchanged, with Greene, Catherine Mann and Huw Pill forecast to favour a hike. They added that the risks could be tilted toward a larger number of dissenters, with a small possibility that either Lombardelli or Ramsden could also back an increase.
The Bank of England held rates steady in July while assessing the inflationary impact of the U.S.-Iran war. The absence of progress toward a Middle East peace agreement subsequently contributed to Mann joining the more hawkish camp.
Financial markets are currently pricing in one 25-basis-point increase in UK interest rates by the end of 2026, despite evidence that conditions in the labour market are weakening.
Recent retail data have also pointed to softer momentum in consumer spending. British retail sales growth fell to a four-month low in August after the boost from exceptionally hot weather earlier in the summer faded, according to figures from the British Retail Consortium.
Against the euro, sterling was broadly stable at 85.83 pence. It performed more poorly against the Japanese yen, falling 0.2% to 208.46 yen, its weakest level in almost seven months. The yen has strengthened as investors anticipate a potentially hawkish Bank of Japan decision next week.
Broader geopolitical risks remained a concern for financial markets. Oil prices rose to multi-week highs after Iran-backed Houthis attacked energy facilities in Saudi Arabia, while Tehran warned the United States of what it described as “economic warfare”.
Brent crude futures climbed 1.7% to $98.70 a barrel, adding another potential source of inflationary pressure for central banks and keeping the Bank of England’s upcoming policy signals firmly in focus.
