Pound Sterling risen to roughly 1.3220 against the US Dollar, as UK core inflation grew faster than forecast in August.
The Pound Sterling (GBP) rose versus its major counterparts in Wednesday’s North American session after the United Kingdom’s (UK) inflation figures for August came in higher than expected. The Office for National Statistics (ONS) said that the core Consumer Price Index (CPI) – which excludes volatile goods such as food, energy, oil, and tobacco – grew by 3.6%, exceeding the 3.5% expected and Increasing from 3.3% in July.
Services inflation, a key measure for Bank of England officials, increased dramatically to 5.6% from 5.2% in July.
Services inflation, a key measure for Bank of England officials, increased dramatically to 5.6% from 5.2% in July. This acceleration in inflation may push traders to reduce their wagers on the Bank of England (BoE) cutting interest rates again later this year.
Meanwhile, headline inflation increased by 0.3% and 2.2% monthly and annually, confirming analysts’ estimates.
Investors will pay close attention to the Bank of England’s monetary policy decision on Thursday. Prior to the release of inflation data, markets expected the Bank of England to keep interest rates at 5%. With August statistics indicating that inflation remains persistent, market expectations that interest rates will remain at present levels by the end of the year may rise.
Daily market movers: Pound Sterling soars as strong UK inflation reinforces hopes of solid BoE policy.
In Wednesday’s New York session, the pound sterling surged to near 1.3220 versus the US dollar (US) following the announcement of scorching UK inflation data for August. The GBPUSD pair reclaims the immediate resistance of 1.3200. Although it predicted to be quite volatile as the Federal Reserve’s (Fed) monetary policy decision is announce at 18:00 GMT.
The Fed appears to be preparing to announce its first interest rate drop in more than four years.
According to the CME FedWatch tool, the central bank is almost expected to begin cutting interest rates. This will be the Fed’s first interest rate decrease decision in more than four years. However, the disagreement is on how quickly essential borrowing rates will be decreased. 30 day Federal According to Funds Futures pricing data, the central bank’s chance of decreasing interest rates by 50 basis points (bps) to 4.75%-5.00% is 65%, with the balance favoring a 25-bps decrease.
The Fed will return to policy normalization, as recent comments from officials imply that the central bank is more worried with declining labor demand than inflation.
Aside from the Fed’s policy decision, investors will watch the Fed’s dot plot, economic projections, and Fed Chair Jerome Powell’s news conference following the interest rate announcement. The Fed dot plot represents all policymakers’ medium and long-term forecasts for the federal funds rate.
On the economic statistics front, the United States’ (US) monthly Building Permits Housing starts were more than projected in August. Building permits and housing starts totaled 1.475 million and 1.356 million, respectively.
