Pound holds its floor as BoE member Greene presses for a hike

Bank of England external member Greene warned against assuming markets will carry out the BoE's tasks, citing UK pay awards expected to rise by around 3.5% next year. Greene has voted in favor of a hike at each of the last three BoE meetings. Governor Bailey argued that higher borrowing costs since the US-Iran war started have allowed the BoE more time to decide, a point Greene called dangerous.

Traders price an 83% chance of a UK Bank Rate increase to 4.00% from 3.75% on November 5, while there's roughly a 20% chance of a Fed hike on October 28. A BoE move first would align Bank Rate with the top of the Fed's 3.75%-4.00% range, removing the additional interest a Dollar deposit earns over a Pound one. GBP/USD briefly dipped under 1.3200 before Bailey's speech in Istanbul, near a three-month low set on October 1, but recovered slightly and closed near 1.3250 as the Dollar retreated from near its 18-month high.

Since mid-September, every daily low has come within about 30 pips of 1.3200, while every high has stopped below 1.3300, except a brief spike above it on September 30. The GBP/USD pair has traded below both its 50-day and 200-day Exponential Moving Averages since mid-September. The BoE has seven upcoming speeches between October 12 and October 16, all testing an 83% chance priced for November.

Before these speeches, Friday's University of Michigan survey on US households' one-year inflation expectations (4.6% in September) could boost the odds of an October Fed hike. The US Consumer Price Index (CPI) data follows on Wednesday, October 14, and UK GDP for August on Thursday, October 15. A robust US inflation reading could bring the three-month low back within reach, while a weak one might leave the November BoE hike as the only likely move before December.

The Pound Sterling, the world's oldest currency since 886 AD, is the fourth most traded currency in foreign exchange (FX), accounting for 12% of all transactions, averaging $630 billion daily. Its official currency in the United Kingdom, its value is primarily influenced by the Bank of England's monetary policy decisions aimed at maintaining a steady inflation rate of around 2%.

When inflation is too high, the BoE raises interest rates to rein it in, positively impacting GBP, as higher rates make the UK more attractive to global investors. Conversely, if inflation falls too low, signifying slowing economic growth, the BoE may lower interest rates to stimulate borrowing and investment in growth projects.

Economic data releases like GDP, Manufacturing and Services PMIs, and employment figures can significantly influence GBP's value. A strong economy attracts foreign investment and may prompt the BoE to raise interest rates, strengthening GBP. However, weak economic data can weaken the Pound Sterling. Another crucial data release for GBP is the Trade Balance, which measures the difference between a country's export earnings and import spending.

A positive net Trade Balance strengthens a currency, while a negative balance weakens it. Joshua, a Forex analyst from Vancouver Island University, joins the FXStreet team with twelve years of experience as an independent trader, focusing on technical analysis.