Institutions say a UK rate hike may not boost the pound, as fiscal risks remain

(1) Monex Europe analysts stated in a report that the Bank of England may raise interest rates in November to counter the shock of rising energy prices, but this move may not necessarily strengthen the pound. (2) Analysts expressed caution about the extent to which the pound can benefit from rate hikes forced by the energy shock, as this shock is also squeezing economic growth. (3) They noted that fiscal risks still remain ahead of the budget announcement on October 28. (4) Chancellor John Healey has mentioned fiscal discipline, but almost all fiscal space has already been eroded. (5) However, analysts believe that until the fiscal reality becomes completely clear, risks facing the pound are two-sided. (6) UK Prime Minister Andy Burnham will deliver a speech at the Labour Party Conference at 1 PM London time. (7) The pound fell 0.2% to $1.3229, while the euro was flat at £0.8574. (8) Overall, market sentiment is torn between interest rate hike expectations in the UK and fiscal uncertainty, with subsequent focus on whether budget details and policy signals from the Labour Party Conference can provide direction for the pound.