The UK rate market is currently pricing in only around 6 bps of hikes and 11 bps hikes by the December MPC meeting. It highlights that market participants are not yet as confident that the BoE’s tightening cycle is over. It would though take a big upside inflation surprise in Wednesday’s CPI for September to shake up expectations that the BoE will stay on hold next month. 

We expect the report to show further evidence that inflation pressures are easing. A softer CPI reading would drag the Pound towards the bottom of its recent trading ranges against the EUR and USD.