GBP/USD experiences a pullback on Thursday, declining more than 0.21% following the recent inflation report, which has heightened the likelihood of a Bank of England rate cut by year-end. Currently, the pair is trading at 1.3326, having peaked at 1.3360.
GBP/USD declines 0.21% to 1.3326 following UK inflation falling short of both BoE and market expectations. The expectations for a rate cut by the Bank of England have increased, with markets now anticipating 20 basis points of easing for December, an increase from the previous 11 basis points. The US Dollar is experiencing support due to trade tensions and increased haven demand, while Gold has rebounded by over 1%.
> Sterling experiences a decline as traders adopt a cautious stance in anticipation of the crucial US CPI release on Friday : An absence of significant economic data in the US and the UK has traders on standby for the upcoming US Consumer Price Index report on Friday, where projections for both headline and core inflation stand at 3.1%. During this period, Existing Home Sales in the US increased by 1.5% in September, in contrast to August’s -0.2% decline. Sales increased by 4.06 million, rising from 4 million. The ongoing trade rhetoric from the White House regarding China continues to create unease among investors, prompting a shift towards safe-haven assets such as the US Dollar and Gold, which has seen a recovery of over 1%. On Wednesday, sources disclosed that the Trump administration intends to impose restrictions on globally produced exports to China that incorporate or utilize US software. This move is seen as a response to China’s export controls on rare earths and the fees charged to US vessels at ports. In the interim, delegations from Washington and Beijing are scheduled to convene at a summit in Malaysia from October 24 to 27, prior to the anticipated meeting between President Donald Trump and Chinese President Xi Jinping. In the UK, British inflation remained stable in September, falling short of both market estimates and the BoE’s forecast. After the data release, the probabilities for an interest rate cut rose from 11 to 20 basis points of easing by the UK central bank at the December meeting.
Despite this, the interest rate differential between the US and UK suggests potential for further appreciation in the GBP/USD pair. Nevertheless, fiscal challenges with the UK’s finance minister Rachel Reeves, who will announce the budget next month, are anticipated to encompass a blend of tax increases and expenditure reductions. Nick Rees stated that he anticipates Sterling’s weakness due to the possibility of the budget not being well-received.