Sterling on track for weekly gain ahead of UK inflation data

BY Reuters | ECONOMIC | 05/17/24 05:59 AM EDT

LONDON, May 17 (Reuters) - Sterling was on track for a weekly gain versus the dollar on Friday, as currency traders look ahead to key data releases next week that could point to how quickly the Bank of England may cut interest rates.

The pound edged down 0.1% on the day to $1.2656, but was on track for a weekly gain of 1%. Against the euro, it gained 0.1% to 85.70 pence.

Data this week showed that British wages grew by more than expected in the first three months of the year, but other figures suggested the labour market is losing some of its inflationary heat.

Closely-watched consumer price inflation data is due out on Wednesday, while 'flash' PMI data on British business activity will follow the next day.

Money markets are pricing in around a 55% chance of a rate cut in June, according to LSEG data.

"Our baseline case is still a June rate cut. We do consider however that significant reductions in the pace of private pay and the rate of services inflation could be quite a stretch and that the Monetary Policy Committee (MPC) could delay a move to August," economists at Investec said in a note.

On Tuesday, Bank of England chief economist Huw Pill said the central bank might be able to consider cutting interest rates over the summer.

(Reporting by Iain Withers; Editing by Clarence Fernandez)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.