By CNBC
Publication Date: 2025-11-19 11:04:00
BATH, UNITED KINGDOM – JUNE 8: In this photo illustration, British £20 banknotes are shown with one dollar banknotes and 50 euro banknotes on June 8, 2025 in Bath, England. The value of the US dollar (USD) has fluctuated against global currencies such as the euro (EUR) and the British pound (GBP) as tariffs introduced by US President Donald Trump continue to disrupt the US economy. (Photo by Matt Cardy/Getty Images)
Matt Cardy | Getty Images News | fake images
Sterling fell after data on Wednesday showed British consumer price inflation fell to 3.6% in October, the first drop since May, and traders raised bets that the Bank of England will cut interest rates in December.
Consumer price inflation fell to 3.6% in October from September’s joint 18-month high of 3.8%, as expected by the Bank of England and economists polled by Reuters.
The data solidified expectations that the Bank of England could cut interest rates in December, while elsewhere investors struggled for direction and U.S. agencies cleared a backlog of data after a prolonged government shutdown.
“Today’s report could give the Bank of England more ammunition to cut interest rates next month, although we still think the decision will be risky, and we don’t expect future interest rate prices to change too dramatically following this report,” said Kathleen Brooks, head of research at XTB.
Markets now see an 86% probability that the Bank of England will cut rates by 25 basis points in December, up from an 80% probability assessed on Tuesday, according to LSEG data.
Brooks said there was another report on the labor market and inflation expected before the Bank of England’s December meeting, which could change the rate adjustment and limit the immediate fall in government bonds and the pound.
The Bank of England paused its quarterly pace of rate cuts earlier this month and Finance Minister Rachel Reeves said she would seek to avoid tax and spending measures that could increase inflation in her annual budget on November 26. “The budget is the next major driver of the pound. If Rachel Reeves’ fiscal plans do not convince the market that she has a credible plan for fiscal consolidation over the rest of this parliament, then we could see bond yields soar again and this could weigh heavily on the pound,” Brooks added.
Sterling was down 0.17% against the dollar at 1.3133, its lowest level since Friday, when British markets were rocked by speculation surrounding the long-awaited budget.
The euro rose 0.07% against the pound to 88.14 pence, after trading as high as 88.64 pence on Friday, its highest level since April 2023.
