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US inflation figures helped the US dollar put European currencies to the sword on Wednesday.
The pound and the euro came under pressure from the US dollar on Wednesday, following inflation data that suggested cooling (but not plunging) prices. That distinction was important, as it suggested the Federal Reserve would decide to cut interest rates by 0.25% instead of 0.5% at its upcoming meeting.
GBP/USD fell by a cent yesterday afternoon, reaching its lowest in three weeks. EUR/USD slipped to its weakest since the middle of August, although the euro did advance by around 0.25% over the pound.
US headline inflation slowed to 2.5% in August, marking its fifth consecutive monthly fall. However, with monthly core inflation rising slightly from 0.2% to 0.3%, markets took the data as an indication that the Fed would opt for a less aggressive approach.
Sterling was hampered by news that economic growth stalled in July. GDP had been expected to expand by 0.2%, so the second consecutive month of zero growth represented a rude awakening for the pound, which had been enjoying a period of high-flying stability.
The European Central Bank (ECB) is expected to cut the deposit facility rate from 3.75% to 3.5% and the main refinancing rate from 4.25% to 4% later today. The decision comes amid falling inflation in key European economies, as well as recent trouble in the German economy.
British individuals have at least £430bn in excess savings, according to a recent study by Barclays. Analysts said that roughly 13mn adults were at risk of missing out on investment profits and suggested regulatory changes were needed to encourage investment.
Analysis of the presidential debate between Kamala Harris and Donald Trump dominated the airwaves yesterday. Most observers felt Harris had just shaded the contest, although unlike in the first debate with Joe Biden, the debate lacked an indisputable moment of victory likely to stick in the memory. The candidates remain neck and neck in many key states.
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GBP: Paying the price
The pound continued to pay the price for the UK’s economic shortcomings. Sterling fell against its major rivals as growth flatlined for the second month running.
GBP/USD: the past year
EUR: Awaiting ECB outcome
The euro will be in for a nervous wait ahead of the ECB’s interest rate decision today. A rate cut is all but priced in at this point, although you can never tell when markets (or policymakers) might be readying something different.
GBP/EUR: the past year
USD: Core shifts the dial
Although headline inflation fell, core inflation’s surprise uptick gave the US dollar a leg up heading into the Fed’s next meeting.
EUR/USD: the past year
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