Sterling Closes at 1.34293 Ahead of Bank of England Decision as Markets Await Outcome

Key Facts

GBP/USD closed at 1.34293 on November 3, according to EL7 data, providing a reference level for markets ahead of the Bank of England meeting scheduled for November 5. The close came as markets tracked the pound’s direction amid an imminent monetary policy decision, while also watching developments involving the United States and Iran. This figure alone does not establish that the pair hit an intraday high during the November 4 session, so the previous day’s dated close remains the available figure for describing its move. In Britain, Decision Maker Panel data show that companies’ expectations for consumer price inflation over the next year rose, while their expectations for wage growth held steady. The upcoming decision therefore comes against a set of data combining higher near-term inflation expectations with unchanged wage growth expectations.

The Bank of England said one-year expectations for consumer price index inflation rose to 3.3% in the three months to October, from 3.1% in the three months to September. Over a longer horizon, three-year inflation expectations were 2.8% in the three months to October, unchanged from the corresponding period to September. Companies’ expectations for wage growth over the coming year held steady at 3.4% in the three months to October. These indicators distinguish between price and wage expectations: the former rose over a one-year horizon, while wage expectations and three-year inflation expectations remained steady. The Decision Maker Panel survey was conducted between October 2 and 16 and received 1,945 responses, defining the period reflected in these readings.

The Bank of England is holding its Bank Rate at 3.75% ahead of its next meeting on November 5, the scheduled date for publication of the meeting summary and minutes and the Monetary Policy Report. In the Market Participants Survey, the median expectation for the interest rate after the November meeting was 3.75%, while the upper quartile was 3.81%, based on 92 responses. These readings indicate that the median was not an expectation of a rate increase to 4%, although the upper quartile was above the current level. The outcome of the September meeting provides context for the division within the Monetary Policy Committee: members voted by a majority of 6 to 3 to keep the rate at 3.75%. The three dissenting members voted to raise it by 0.25 percentage points to 4%. The November meeting summary and minutes and the Monetary Policy Report are scheduled to provide details of the decision and the Bank’s assessment at the same time.

The market’s wait for the Bank’s decision coincided with conflicting developments on Iran, which may remain part of investors’ assessment of assets and markets. The Associated Press reported that the United States carried out what it described as a limited strike on Iranian targets in the Strait of Hormuz ahead of Tuesday’s U.S. midterm elections. The agency reported that talks aimed at avoiding a resumption of broader operations were under way, keeping both escalation and de-escalation in the news context. On November 3, President Donald Trump told the Financial Times that the United States had no immediate plans to strike Iran. But the statement did not end concerns about a resumption of operations: Iran’s National Security Council chief said the U.S. response to Tehran’s demands to end the war was not convincing. The official linked reopening the strait to those demands, according to the Associated Press.

On the dollar, trading on November 3 showed choppy movement between gains and limited losses as investors assessed the prospect of a change in control of Congress and its market implications. Reuters noted that conflicting signals on Iran talks were among the factors investors followed that day. A Reuters report also said U.S. job openings rose 333,000 in September to 7.523 million, exceeding economists’ estimate of 7.100 million. Job openings measure companies’ demand for labor, and the figure came in above the estimate compiled by Reuters. The report identified the government jobs data due on Friday as the next milestone that could affect expectations for Federal Reserve policy. Sterling’s performance is thus being watched alongside the Bank of England decision on November 5 and upcoming U.S. data of interest to dollar investors.