Key Insights for FunderPro's Traders
- UK Consumer Price Index data pressured the British Pound while the US dollar maintained its strength
- The Bank of England’s next rate-setting meeting is on deck for Nov. 2
The Great British Pound (GBP) is facing downward pressure following the UK Consumer Price Index (CPI) data released Wednesday. The GBP/USD pair is currently sitting at around $1.2101 in a fresh two-week low, after brushing on a session high of $1.22.
UK Headline CPI held steady at 6.7% for September, only slightly outshining a 6.6% forecast, and in line with the previous month’s inflation pace. Core CPI, which excludes food, energy, alcohol, and tobacco, declined from 6.2% in August to 6.1% in September.
While the UK’s preferred gauge of inflation includes housing costs (CPIH), the CPI data allows for international comparisons, which show that the UK’s current inflation rate is higher than those of France or Germany.
The UK’s central bank, the Bank of England (BoE) recently decided to pause its string of interest rate hikes as part of its hawkish strategy to meet its 2% inflation goal, mirroring the US Federal Reserve. The decision to maintain their interest rate unchanged was the first such move in two years, following a series of 14 consecutive hikes. The current interest rate of 5.25% is the highest since the 2008 recession levels.
The BoE’s next meeting is scheduled for Nov. 2, where they will make their next decision regarding the key interest rate. If everything goes according to plan, economists predict inflation to drop to just over 4% by the end of 2023, and to reach the 2% goal by the second quarter of 2023.
The US dollar took the lead Thursday as treasury yields climbed higher, with the dollar index passing 106.50 this morning. The 10-year Treasury yield has crossed the 4.9% mark, the highest since 2006.
The S&P 500 braced for another hit as it declined 1.34%, while the Nasdaq bore the worst of the sell-offs with a 1.64% decline. The Dow Jones Industrial Average erased any gains it made this week with a drop of 0.98%, snapping a 3-day winning streak.
The already-strong US dollar may be further bolstered by Fed Chair Jay Powell’s speech later today in New York regarding the economic outlook.
Ultimately, traders should monitor GBP/USD movements. Stay informed regarding the BoE’s interest rate decisions, as any news could strike volatility in the market. The same sentiment can be shared regarding Jay Powell’s speech later today. As always, it’s important to control your emotions and stick to your winning trading plan to succeed.