Oct 2 (Reuters) – The British pound steadied on Wednesday, a day after it fell sharply against the dollar as the growing conflict in the Middle East spurred demand for safe haven assets.
The dollar was boosted on Tuesday as Iran fired ballistic missiles on Israel, an assault that, along with Israel’s incursion into Lebanon, has sparked fears of a wider conflict in the oil-producing Middle East.
Euro/sterling was flat at 83.29 pence per euro, while the pound firmed 0.6% against a weakening yen to 191.80.
Beyond headlines on the Middle East, market participants will look to U.S. jobs data on Friday, which could offer hints on the health of the world’s biggest economy and shape the Fed’s policy path.
The BoE, which began lowering its key borrowing rate in August, is expected to cut rates more gradually compared with European and U.S. peers as it battles sticky inflation, boosting the pound this year.
Money markets are pricing in 36 basis points of rate cuts by year-end, implying a 25 basis point move and a roughly 45% chance of another. IRPR
Several BoE officials are scheduled to speak this week, including Chief Economist Huw Pill on Friday, while service sector and house building surveys are due on Thursday and Friday respectively.
“Focus in the UK this week will be almost entirely on communications from Bank of England officials. We suspect that officials will strike a similar tone, warning against rapid cuts, and validating our view for rate reductions on roughly a quarterly basis,” Ryan said.
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Reporting by Medha Singh in London
Editing by Mark Potter
Our Standards: The Thomson Reuters Trust Principles.
