Sterling Stumbles as Expectations Mount for BoE Rate Cut

Sterling faced its third consecutive weekly loss against both the dollar and the euro, as the Bank of England's recent rate decision fell short of dovish expectations. Investors are particularly focused on a potential rate cut in December, following a narrow vote and comments suggesting that BoE Governor Andrew Bailey might soon advocate for easing.

The BoE's decision to hold rates surprised those who anticipated a 25-basis-point cut. Markets are now bracing for significant fiscal tightening measures in the upcoming Autumn Statement, potentially paving the way for the BoE to lower rates further in 2026. Meanwhile, the US dollar gained modestly despite mixed signals from the Federal Reserve and ongoing concerns about the US economy.

As sterling fell by 0.27% to $1.3105, market analysts, including Lee Hardman of MUFG, predicted further pound depreciation against the euro towards year-end. Global forex strategies, such as those by Chris Turner at ING, suggest that the euro will find robust support around 0.8760 pence, with expectations for lower short-term rates and a weaker pound into the forthcoming Budget release.