Sterling faces headwinds on dovish BoE sentiment

The GBPUSD pair edges higher toward 1.3000 during Asian trading on Wednesday.

However, the Pound Sterling faces headwinds due to declining consumer and producer inflation figures, coupled with weak labour market data in the UK. These factors are fueling expectations that the Bank of England may implement a 25 basis point rate cut in November, followed by another quarter-point cut in December.

On Tuesday, BoE Governor Andrew Bailey highlighted the need for the UK central bank to enhance its ability to monitor developments in the less transparent non-banking system.

Speaking at a Bloomberg event in New York, Bailey noted, “we are approaching a point where we need to pivot from rule-making to surveillance” to better track financial activities outside the traditional banking sector.

Furthermore, BoE Deputy Governor Sarah Breeden is scheduled to participate in a panel discussion on financial regulation, organised by the Institute of International Finance (IIF) in Washington on Wednesday.

The US Dollar is gaining ground as Treasury yields rise due to the increasing likelihood of nominal rate cuts by the Federal Reserve.

The DXY Dollar Index, which tracks the dollar against six major currencies, is trading near a two-month high at 104.20. Meanwhile, yields on 2-year and 10-year US Treasury bonds are at 4.05% and 4.23%, respectively.

In a post on the social media platform X, Federal Reserve Bank of San Francisco President Mary Daly stated that the U.S. economy is clearly in a better position, with inflation having fallen significantly and the labour market returning to a more sustainable path.

(Source: OANDA)