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17 April 2024 | FXGT.com
Sterling Gains as UK Inflation Surpasses Expectations
- UK Inflation Above Expectations: The Pound Sterling advanced above $1.2450 against the US Dollar as UK inflation data for March showed a higher-than-expected increase. The headline CPI rose by 3.2%, above the expected 3.1%, while being the lowest rate since September 2021. Despite the decline, inflation remains higher than anticipated, leading to speculation that the Bank of England might delay easing monetary policy.
- Core Inflation Also High: Core inflation, which excludes volatile food and energy prices, decreased to a two-year low of 4.2%, but was still slightly above the forecast of 4.1%. This suggests persistent price pressures that could impact future rate decisions.
- Impact of UK Employment Data: Recent UK economic reports indicate a concerning rise in unemployment to 4.2%, highlighting challenges in the labour market, potentially influencing the Bank of England’s monetary policy decisions.
- UK Interest Rate Expectations Adjusted: Market expectations for interest rate cuts have been modified, with traders now forecasting a decline in the UK’s rate to around 4.75% by the end of 2024, a reduction from the current rate of 5.25%.
- Fed’s Hawkish Stance Strengthens USD: Despite the Pound’s recovery, the US Dollar remains strong following Federal Reserve Chair Jerome Powell’s hawkish remarks on keeping interest rates elevated for a longer period, due to ongoing labour market strength and the current pace of inflation.
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