The GBP/USD pair is experiencing mild losses, trading around 1.3060 during the early European session on Monday. Safe-haven flows driven by escalating geopolitical risks are bolstering the US Dollar, exerting downward pressure on the currency pair. Investors are set to closely monitor UK employment data, scheduled for release on Tuesday.
Recent data from the US Bureau of Labor Statistics revealed that the annual Producer Price Index (PPI) increased by 1.8% year-on-year in September, down from a 1.9% rise in August but exceeding market expectations of 1.6%. Additionally, the core PPI rose by 2.8% year-on-year, surpassing analysts’ forecasts of 2.7%. On a monthly basis, the overall PPI remained unchanged, while the core PPI saw a 0.2% increase.
The Federal Reserve has shifted its focus from combating inflation to maintaining a healthy job market, part of its dual mandate. A stronger-than-expected jobs report for September, combined with diminishing expectations for a substantial 50 basis point rate cut in November, could support the USD against the Pound Sterling.
On the UK front, dovish comments from Bank of England (BoE) Governor Andrew Bailey suggest that the central bank may consider a more aggressive approach to cutting rates. Markets are pricing in a 90% probability that the BoE will reduce rates in November. The BoE’s Monetary Policy Committee (MPC) is set to convene on November 7 to announce its interest rate decision. Ahead of this key event, Tuesday’s UK employment data will be closely scrutinized for insights into the labor market and the broader outlook for UK interest rates.
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