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Pound Edges Sideways, Faces Biggest Weekly Drop Since September
13 Nov
Summary
- The pound remained unchanged, heading for its largest weekly decline since September.
- Rising US Treasury yields and hawkish Federal Reserve comments bolstered the dollar.
- UK economic growth data matched expectations, supporting a potential December rate hike.
The British pound experienced minimal change on Friday, signaling its largest weekly depreciation since September. This movement occurred as the US dollar maintained near 19-month highs, bolstered by escalating US Treasury yields and assertive statements from Federal Reserve officials. These developments reinforced expectations of further interest rate tightening from the US central bank.
In separate but related news, the UK's economic growth data, released recently, met expectations. This outcome supported the Bank of England's recent decision to raise interest rates. Market participants currently estimate an approximately 85% probability of another rate hike by the Bank of England in December.
Looking ahead, forthcoming UK inflation data is anticipated to surpass consensus estimates. This release is expected to further sway market sentiment towards a potential 25-basis-point rate increase at the Bank of England's next meeting. However, one analyst suggested the Bank of England might opt to maintain its current rate in 2027, citing concerns over UK economic growth and fiscal risks.
Simultaneously, sterling showed a slight strengthening against the euro, trading at its firmest level since May 2025. Analysts anticipate that upcoming US producer price data should not significantly disrupt money markets, potentially offering some stability for the pound in the absence of further market-moving catalysts.
