Market Report : 20.12.2023

Published: 20/12/2023 By ECAP

The British Pound fell against a basket of currencies after U.K. inflation plunged in November, dropping to 3.9% from 4.6% in October - the lowest reading since September 2021. Although the Bank of England kept its main interest rate unchanged at its meeting last week and stated that rates would remain high for "an extended period", this reading has prompted investors to fully price in a rate cut by May 2024, causing the pound to fall sharply.

The Euro was relatively flat this morning after yesterday’s data from Eurostat showed that Eurozone inflation missed market expectations in November due to the fall in energy prices. However, the annual euro area inflation arrived at 2.4%, in line with analyst expectations. Looking forward, investors will focus on the German Producer Price Index for November for further cues on the region’s economic health.

The dollar has been on the backfoot since last week's policy-setting meeting of the Fed saw three rate cuts pencilled in for 2024. However, these losses have largely been contained as a series of Fed policymakers have attempted to rein in these dovish expectations. Looking forward, the core Personal Consumption Expenditures price index, the Fed’s favourite measure of inflation, is due on Friday, and could show whether inflation has slowed enough for the Fed to begin easing policy next year.

Data supplied by GC Partners