Daily FX Report – UK Inflation Falls

GBP: This morning, the British Pound declined across the board as UK inflation data dropped to its lowest level in three years for September, encouraging investors to anticipate more aggressive interest rate cuts from the Bank of England. Currently, markets expect a 25 basis point rate cut at one of the BoE’s policy meetings in November or December.

 

EUR: Meanwhile, the Euro continued to weaken yesterday after additional regional inflation data signalled further rate cuts by the European Central Bank, beginning as soon as Thursday. The ECB has already reduced rates twice this year, and a cut to the 3.5% deposit rate later this week is largely expected.

 

USD: The U.S. Dollar dipped slightly in Asian trading, though it remained near the two-month high reached earlier in the week. The dollar has been supported by increasing speculation that the U.S. economy’s resilience will lead to a slower pace of Federal Reserve rate cuts. Recent data on U.S. consumer inflation and the labour market reinforced this view.