Pound drops back under 1.34 after a hot US inflation report
The UK's Bank Rate is level with the top of the Fed's 3.75%-4.00% range, and a hot US inflation report has left a December Fed hike fully priced. The Pound has given back all of Monday's rise, dropping to just above 1.3300 for its lowest since late October, and has steadied near 1.3350.
The British Pound has fallen back below 1.34 after a strong US inflation report, which has priced in a potential December Federal Reserve rate hike. The Pound is now trading near 1.3350, its lowest since late October. Fed Governor Waller indicated a likely December hike, with a half-point increase possible. October US consumer prices surpassed expectations, while traders estimate a quarter-point hike at 90%, and a half-point at 10%.
A Fed hike would push the Bank of England's (BoE) rate floor closer to 4.00%, the level achieved in November's rate hike. BoE Deputy Governor Lombardelli suggested another near-term rate hike may occur unless inflation pressures diminish. The UK's third-quarter GDP is expected to be released on Thursday, with a forecast of 0.7% growth after 0.5% growth.
A stronger quarter could bolster the BoE's case for another rate hike. New York Fed President Williams will speak on Thursday at 23:30 GMT. The decline has erased more than two-fifths of the Pound's gain since October 14, when it hit its lowest level since mid-September. The Pound Sterling, the world's oldest currency, is issued by the BoE and is influenced by monetary policy aimed at maintaining price stability around a 2% inflation rate.
Data releases, including GDP, PMIs, and employment figures, impact the value of the Pound. A strong economy and positive data releases typically strengthen the Pound, while weak data can lead to its decline.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
