Sterling pushed higher against the dollar in early European trading, rising 0.3% to $1.2959, as the governor of the Bank of England appeared to signal a more cautious approach to cutting interest rates .
Speaking in Washington DC, Bailey remarked that “disinflation is happening faster than we expected, but there are still genuine question marks about whether there have been structural changes in the economy.” His comments suggest the central bank may remain cautious about the pace of monetary easing.
Bailey also pointed out that services inflation, at 4.9% year-on-year in September, remains above the Bank’s target, while the labour market is "probably loosening but still tight." These factors indicate that policymakers may hesitate to move too aggressively on rate cuts.
In response, the odds of a November rate cut have slightly dipped, to 86% according to the latest City pricing, down from 89%.
Read more: FTSE 100 LIVE: European markets rise as BoE's Bailey says UK inflation cooling faster than expected
"Bailey’s remarks on disinflation happening faster than anticipated hint that the Bank may lower rates next month," said George Vessey, FX analyst at Convera. "However, despite improvements in inflation and slowing wage growth, traders are more cautious in betting on rate cuts in both November and December."
Against the euro ( GBPEUR=X ), sterling was also higher, up 0.3% to €1.2018.
Gold prices inched higher on Thursday as safe-haven demand outweighed the pressure of a stronger dollar, with analysts predicting record highs for the precious metal.
Spot gold rose 0.7% to $2,735.36 per ounce, while US gold futures increased by the same margin to $2,748.80. Concerns over ongoing conflicts in the Middle East, combined with uncertainty surrounding the US presidential election on 5 November, have bolstered gold’s appeal as a safe-haven asset.
“For the remainder of 2024, we see potential for gold to hit highs of $2,800, with 2025 targets around $3,000 or more, driven by persistent geopolitical risks, the US monetary easing cycle, and central bank purchases,” Sugandha Sachdeva, founder of SS WealthStreet, told Reuters.
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The precious metal has surged more than 30% this year, fuelled by expectations that the Federal Reserve will continue to cut interest rates.
Suki Cooper, an analyst at Standard Chartered, also sees further upside risk for gold in the coming weeks. The bank expects prices to average $2,800 per ounce in the fourth quarter of 2024, with an average of $2,900 forecast for the first quarter of 2025.
Crude oil prices rebounded on Thursday, climbing around 1% as geopolitical tensions in the Middle East kept markets on edge, reversing some of the losses from the previous session.
Brent crude futures rose by 1.3%, trading at $75.99 per barrel, while US West Texas Intermediate (WTI) gained 1.4%, reaching $71.75 per barrel during early European trading. So far this week, oil prices have risen nearly 4%, helping to offset last week’s decline of more than 7%.
Oil markets are attempting to recover from last week’s sharp sell-off, according to Tina Teng, an independent market analyst. She noted that concerns about weak demand and oversupply may have triggered an overreaction in prices, despite no significant changes in the fundamental conflict in the Middle East.
Phillip Nova’s senior market analyst, Priyanka Sachdeva, highlighted the potential for heightened market volatility in the run-up to the US presidential election, followed by the Federal Reserve’s November interest rate decision. “We could see wilder fluctuations in the oil market as the election approaches,” she said.
Some analysts believe a victory for former US president Donald Trump could weigh on oil prices if he implements policies to increase supply.
Kelvin Wong, senior market analyst at OANDA, suggested that Trump’s potential return to the White House could cap further price increases. "Trump is currently leading over Kamala Harris in betting markets, and he has proposed making the US a major oil supplier, which could add barrels to an already well-supplied market," Wong said.
Meanwhile, the FTSE 100 ( ^FTSE ) was higher at the open, climbing 0.7% to 8,313 points. For more details check our live coverage here .
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