• The Pound Sterling surges to near 1.3160 against the US Dollar amid upbeat market sentiment.
• Investors expect the BoE to leave interest rates unchanged at 5% on Thursday.
• Traders remain divided over the size of the Fed’s likely interest-rate cut.

The Pound Sterling (GBP) performs strongly against its major peers at the start of the week, supported by the improved appeal for risk-perceived currencies and a weakening US Dollar, which is pressured by growing prospects that the Federal Reserve (Fed) will opt for a large interest-rate cut on Wednesday. 

Firm Fed rate cut prospects have weighed on the US Dollar (USD), with the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, posting a fresh weekly low near 100.80.

On the United Kingdom (UK) front, the Pound Sterling will be guided by the Consumer Price Index (CPI) data for August and the Bank of England’s (BoE) monetary policy decision, which are scheduled for Wednesday and Thursday, respectively.

Economists estimate the annual UK core CPI – which excludes volatile components – to have grown at a faster pace of 3.5% from 3.3% in July, with headline inflation rising steadily by 2.2%. Investors will also focus on the UK service inflation data, a closely-watched indicator by BoE officials that has remained high.

The inflation data will significantly influence market speculation for BoE interest rate policy. Currently, financial market participants expect that the BoE will leave interest rates unchanged at 5% and expect it to deliver only one additional interest-rate cut in the remainder of the year.