GBP/USD retreats from 1.3760 to 1.3710 despite increasing bets of a BoE’s hike rate

• The British pound declines despite BoE’s Governor Bailey hawkish comments.
• The market sentiment is downbeat, as European stocks print losses, like US stocks, except for the Nasdaq.
• BoE’s Andrew Bailey said that central banks need to prevent higher inflation expectations from becoming permanent.

The British pound is sliding during the New York session, down some  0.23%, is trading at 1.3712 at the 2time of writing. Surging energy prices, higher inflationary pressures witnessed on the last CPI readings in developed country’s economies, and central banks tightening monetary policy dented the market sentiment.
Significant European equity indexes record losses between 0.45% and 0.85%, while in the US, most of the indexes, except for the heavy-tech Nasdaq, edge lower between 0.02% and 0.22%.

In the meantime, the US Dollar Index, a basket that measures the performance of the US dollar against six peers, advances 0.04%, sits at 93.99, underpinned by US T-bond yields rising, with the 10-year note up one basis point, at 1.586%.

Bank of England Governor Andrew Bailey reinforces that the central bank will take measures to tackle inflation

Over the weekend on a panel organized by the Group of 30, Bank of England (BoE) Governor Andrew Bailey said that while the central banks don’t have the tools to counter supply disruptions, officials need to prevent higher inflations expectations from becoming permanent.

Furthermore, Bailey added that rising energy prices mean inflation will be last longer than expected. Additionally said that “we, at the Bank of England, have signaled, and this is another signal, that we will have to act. But of course, that action comes in our monetary policy meetings.”

That said, since October 9, when BoE’s members Michael Saunders and Andrew Bailey expressed concerns about inflation and the central bank reaction, the British pound rallied from 1.3567 to 1.3772, on investors’ expectations, that an interest rate hike is on the cards.

Putting this aside for a moment, in the UK, the economic docket featured the Rightmove House Price Index for October, which expanded 1.8% and 6.5% on a monthly and annual basis, respectively, higher than the previous reading. On the US front, Industrial Production (IP) contracted 1.3%, worse than the 0.2% expansion estimated by economists. Further, Capacity Utilization followed the IP footsteps, falling from 76.2% in August to 75.2% in September.