Pound Falters as Fed Hike Odds Rise

The British Pound has struggled to break above $1.3400 for three consecutive sessions, and it remains just below that level on Monday. The Dollar's strength against most major currencies is behind this movement, with the Pound being a secondary effect. Traders are now more confident than ever that the Federal Reserve will raise interest rates again in October, with odds of 53% according to CME FedWatch.

Chicago Fed President Goolsbee echoed these sentiments on Monday, stating that if US inflation is driven by overheated demand as well as oil and tariffs, the Fed's increases should be bigger and come sooner. This has led to increased bets against the Pound, with speculators holding 58.7K more contracts betting against Sterling than for it.

The upcoming UK data releases may provide some insight into the BoE's next move, but they are unlikely to change the interest rate scenario. The Office for Budget Responsibility works out the government's interest bill from gilt yields averaged over ten working days, and a higher 10-year gilt yield would result in bigger tax rises or spending cuts.

Meanwhile, three external members of the BoE who voted against an increase last month are scheduled to speak on Thursday, providing some potential market-moving moments. Their views will be closely watched by traders and investors, but it remains to be seen if they will switch their stance.