As has been the case since August, the market no longer expects the BoE to cut rates at the November policy meeting. Currently market implied policy rates suggest that 2 bps of easing is expected on a 1-month view and 12 bps in 3 months, Rabobank's FX analyst Jane Foley reports.

Focus shifts to 2025 outlook

"Previous market expectations that the BoE would be biased towards a November rate cut were heavily undermined by the rhetoric that accompanied the BoE’s early August policy meeting. Even though the BoE cut rates, the voting pattern suggested that policy-makers were more cautious than expected. Indeed, while Governor Bailey suggested that the rate cutting cycle was not over, he appeared to row back some of his confidence that a loosening in the labour market would slacken demand and reduced-price pressures."

"Although the BoE’s November 6 policy meeting will be closely watched for any change in messaging, the policy decisions made by the BoE next year are likely to be influenced by the UK’s November 26 budget which it likely to re-set the parameters around the UK’s growth and inflation outlook. Relative to its G10 peers, the pound has managed a fairly unremarkable performance in recent weeks."

"Like all other G10 currencies, it has lost ground vs. the USD and, while it is also trended lower vs. the EUR in recent weeks, EUR/GBP is trading off its recent highs. We continue to expect EUR/GBP to grind slowly higher into next year. On the assumption that the USD holds its better tone on a 1-to-3-month view, we see scope for dips in cable back to the 1.32 area on a 3-month view, though we expect a softer tone in the greenback to re-emerge next year."