Sterling rises to 10-week high

The British pound rose past $1.363, the highest since early July, as markets awaited a busy week of central bank decisions and UK data.

The Bank of England is expected to hold rates at 4% on Thursday while slowing its £100 billion annual bond unwind.

UK inflation for August, due Wednesday, is forecast at 3.8% y/y, matching July’s 18-month high, with retail sales to follow later.

Latest jobs data showed wage growth excluding bonuses at 4.8% and 4.7% including bonuses, unemployment steady at 4.7%, and payrolls down 8,000, all in line with expectations. The figures indicate a gradually slowing labor market, leaving BoE rate-cut bets largely unchanged, with markets seeing only a one-in-three chance of a cut by December.

Meanwhile, the US Federal Reserve is widely expected to deliver a 25 bp rate cut on Wednesday, with traders pricing in at least two more reductions by the end of 2025.