Sterling Slides on Oil Price Volatility vs BoE Rate Hike Odds
The value of sterling has dropped to its lowest in seven weeks as investors weigh the effects of falling oil prices against the likelihood of a Bank of England interest rate hike.
Cheap crude oil is lowering inflation by reducing fuel and shipping costs, which may ease pressure on the BoE to raise rates further. However, money markets still see a 65% chance of a November rate increase and predict four quarter-point increases by the end of next year due to officials' warnings about sticky inflation.
UK economic data is under scrutiny, with September's purchasing managers' index (PMI) readings set to play a key role in determining investors' expectations for growth and the path of interest rates. A strong PMI reading could boost investors' confidence in a higher 'peak rate', while a weak result may reduce the likelihood of further rate hikes.