The Pound began local trading on the back foot against the US Dollar as indications that the US economic recovery is gathering momentum boosted the ‘Greenback’ while concerns regarding today’s UK inflation report restrained the Pound.
The Pound Sterling to US Dollar Exchange Rate was in the region of 1.5868 as of 11:10 GMT.
Before the British consumer price index was published forex strategist John Hardy was quoted as saying; ‘If CPI comes in low today, the Pound looks vulnerable against the Dollar. The market has got a little bit ahead of itself on Sterling. There’s a risk that people have become too hawkish ahead of the inflation report’.
While the Pound did derive some support from separate data revealing that a gauge of UK house prices soared to an over 11 year high in October, the asset slumped against its peers as domestic inflation slowed by more than anticipated.
Sterling shed 0.8 per cent against the US Dollar, extending its decline for a third day, and lost 0.5 per cent against the Euro as UK CPI rose 2.2 per cent in October, year-on-year, down from the 2.7 per cent recorded in September and less than the 2.5 per cent estimate.
This is the closest inflation has been to the British central bank’s 2 per cent target for over a year.
Meanwhile, UK factory gate prices climbed by 0.8 per cent YoY rather than the 1.0 per cent forecast.
1 US Dollar is currently worth 0.6296 pence
The unexpected result increased suspense regarding tomorrow’s Bank of England inflation report and piled pressure on the Pound.
The BoE delivered its last quarterly inflation report in August and asserted that unemployment was unlikely to fall below 7 per cent until the end of 2016, meaning that fiscal policy would remain accommodative until that time.
However, since then UK data from various sectors has exceeded expectations and indicated that the UK economic recovery is gathering momentum faster than forecast.
If tomorrow’s UK employment data also points to the unemployment rate declining more rapidly than expected the BoE may have to revise its stance.
With highly influential UK employment data and the BoE inflation report scheduled for release tomorrow the Pound is likely to continue struggling as the European session continues.
Meanwhile, Federal Reserve officials are due make speeches focused on US fiscal policy. If they adopt a hawkish tone the US Dollar could enjoy a bullish relationship with its peers overnight.
Current Pound Sterling (GBP) Exchange Rates:
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The Pound Sterling/US Dollar Exchange Rate is currently in the region of: 1.5868 <
The Pound Sterling/Euro Exchange Rate is currently in the region of: 1.1857 <
The Pound Sterling/Australian Dollar Exchange Rate is currently in the region of: 1.7021 <
The Pound Sterling/New Zealand Dollar Exchange Rate is currently in the region of: 1.9330 <
The US Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.6296 >
The Euro/Pound Sterling Exchange Rate is currently in the region of: 0.8437 >
The Australian Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.5860 >
The New Zealand Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.5157 <
(As of 11:10 GMT)
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