Pound Falls As BoE Governor Bailey Hints At Aggressive Rate Cuts

(RTTNews) - The British pound weakened against other major currencies in the European session on Thursday, after Bank of England Governor Andrew Bailey reportedly hinted at 'more aggressive' path for cutting interest rates if inflation news stays positive.

In a wide-ranging interview with the Guardian, Bailey held out the prospect of the Bank becoming a "bit more aggressive" with interest-rate cuts.

Mr. Bailey added that the monetary policy committee was also closely watching developments in the Middle East amid fears of a fresh oil price shock.

He said, "Geopolitical concerns are very serious. From the point of view of monetary policy, it's a big help we haven't had to deal with a big increase in the oil price.

European stocks traded lower, as investors weigh Middle East risks and await key U.S. data for additional clues on the Fed's rate trajectory.

Investors remain concerned about the prospects of a wider Middle East war, with Israel's war cabinet reportedly weighing its response after Iran launched its largest-ever attack on the country in an escalation of hostilities.

Multiple airstrikes were reported in Beirut earlier today with explosions heard in the Lebanese capital. Authorities said at least six people were killed.

Amid West Asia conflict escalation, several countries have issued advisories, and some have evacuated their citizens.

In economic releases, trading later in the day may be impacted by reaction to the latest U.S. economic data, including reports on weekly jobless claims, service sector activity and factory orders.

Meanwhile, final survey data from S&P Global showed that the U.K. service sector activity continued to expand in September amid rising domestic demand, though the pace of growth eased since August. The S&P Global Services Purchasing Managers' Index dropped to 52.4 in September from 53.7 in the previous month. The flash score was 52.8.

In the European trading now, the pound fell to a 2-week low of 0.8422 against the euro, from an early high of 0.8324. On the downside, 0.85 is seen as the next support level for the pound.

Data compiled by S&P Global showed that the euro area private sector shrank for the first time in seven months in September as Germany, France and Italy recorded contractions simultaneously for the first time in 2024 so far. The final HCOB composite output index fell to 49.6 in September from a three-month high of 51.0 in August. The flash score was 48.9.

The final services Purchasing Managers' Index slid less than initially estimated to 51.4 from 52.9 in the prior month. The flash score was 50.5.

Against the U.S. dollar and the Swiss franc, the pound slid to 3-week lows of 1.3106 and 1.1154 from early highs of 1.3265 and 1.1284, respectively. If the pound extends its downtrend, it is likely to find support around 1.30 against the greenback and 1.10 against the franc.

The pound edged down to 192.24 against the yen, from an early 6-day high of 195.18. The pound may test support near 185.00 region.

In economic news, the services sector in Japan continued to expand in September, albeit at a slower pace, the latest survey from Jibun Bank revealed on Thursday with a services PMI score of 53.1. That's down from 53.7 in August, although it remains above the boom-or-bust line of 50 that separates expansion from contraction. The data also said the composite PMI slipped to 52.0 in September from 52.9 in August.

Japan's newly appointed Prime Minister Shigeru Ishiba said that the nation is not prepared for additional rate hikes, following a meeting with the central bank governor.

Looking ahead, U.S. weekly jobless claims, Canada and U.S. PMI reports for September and U.S. factory orders for August are set to be released in the New York session.