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British pound slips as traders dial back BoE September hike odds

Implied probability of a BoE move in September fell from 60% to 30%, with markets pricing about 31 bps of hikes by year end.

Reported · Written up by our desk · Major Pairs

The British pound was under pressure against major peers, trading around 1.3444 per US dollar in European trading on Friday as traders reassessed Bank of England interest rate expectations for the September policy meeting after the bank’s announcement on Thursday, according to FXStreet.

Deutsche Bank said the BoE was not edging toward a rate hike at its latest meeting, pointing to markets that “dialed back expectations” in response, including a drop in the implied probability of a September move from 60% to 30%, and noting that 31 bps of hikes were priced by year end.

Commerzbank said the BoE’s latest communication took a deliberately cautious tone, highlighting that Governor Andrew Bailey told attendees not to leave with the impression the BoE was moving toward a hike. It also noted that some policymakers kept open the possibility that rate cuts could return to focus if the war ended, leaving the policy outlook dependent on Middle East developments.

Against the dollar, FXStreet said the GBP recovered part of its early losses as the US dollar weakened on doubts over whether the Federal Reserve would use rate hikes to address elevated US inflation. The report also cited the US Dollar Index trading near 100.00 after giving back early gains, and noted that ING said the post-FOMC dollar selloff accelerated as investors questioned whether the Fed would turn its price-stability messaging into effective tightening, with uncertainty around Fed Chair Kevin Warsh weighing on the currency.

Latest closeDollar index 99.80 ▼0.2%

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