The pound dipped versus a broadly stronger dollar on Monday, at the start of a week in which traders and the Bank of England (BoE) will obtain the latest information on the strength of the labor market and pricing pressures.

The focus is on Tuesday’s jobs statistics and Wednesday’s inflation readings, which could indicate if the Bank of England opts for a second successive 50 basis point rate hike at its September meeting.

In July, the headline CPI is estimated to have risen to 9.8%.

Money markets are currently pricing in an 85% chance of a half-point rate hike at the central bank’s September meeting, and a total of about 125 basis points of tightening by the end of the year.

30 of 51 economists polled by Reuters between August 9 and 12 expect the Bank of England to raise borrowing prices by another 50 basis points next month. 

“Despite some risk of tightness in the jobs market starting to ease, we doubt the data will be enough to shake off market pricing that another 50 bp is on the table for September,” said ING global head of markets Chris Turner in a note.

The pound was down 0.33% against the strengthening dollar at $1.2095 as of 08:29 GMT.

Sterling was little changed against the euro, trading at 84.555 pence.

Meanwhile, Bank of England Governor Andrew Bailey informed British Finance Minister Nadhim Zahawi that he was “open to a review” of the central bank’s mandate, according to the Telegraph newspaper.

Liz Truss, the front-runner to be the next Conservative Party leader and Prime Minister, has already stated that she intends to reassess the Bank of England’s policy mandate. 

According to an Opinium Research poll of Conservative Party members conducted on Saturday, Truss is 22 percentage points ahead of her challenger Rishi Sunak in the race to become the country’s next prime minister. The contest winner will be announced on September 5.

Source: Reuters


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