Published: 20/11/2024 By ECAP
The British Pound surged following a higher-than-expected inflation rise in October, with CPI increasing to 2.3% from 1.7%. This fuelled expectations that the Bank of England would maintain higher interest rates for longer. The Pound to Dollar and Pound to Euro exchange rates both rose as markets anticipated no imminent rate cuts. However, the combination of persistent inflation and stalled growth could create a stagflationary environment that may challenge the Pound in 2025.The Euro weakened against the British Pound after the UK’s Consumer Price Index rose to 2.3% in October, exceeding expectations and supporting the Pound. In contrast, Germany’s Producer Price Index fell by 1.1% year-on-year, marking ongoing deflation. Ultimately, as the European Central Bank faces persistent inflation challenges and downgraded growth forecasts, markets anticipate a 25-basis-point rate cut next month, adding further pressure on the Euro.
The U.S. Dollar steadied after three days of losses, recovering from a recent pullback following its rise to one-year highs after Donald Trump's election. Investors are uncertain about the future path of U.S. interest rates, with a 61% chance of a December rate cut. Ultimately, the dollar's long-term outlook remains unclear, especially with the potential for Trump’s expansionary policies to increase inflation pressures.
Data supplied by GC Partners