Pound Rises As U.K. Inflation Accelerates More Than Forecast
November 20 2024 - 12:52AM
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The British pound strengthened against other major currencies in
the European session on Wednesday, after U.K. consumer price
inflation accelerated more than expected in October, lowering the
chances of a rate cut at the upcoming monetary policy meeting in
December.
Markets expect the hot U.K. inflation figures could diminish the
odds of the BoE delivering another interest-rate cut in
December.
Data from the Office for National Statistics showed that the
consumer price index rose 2.3 percent on a yearly basis, following
September's 1.7 percent increase, which was the lowest since April
2021.
The rate again exceeded the Bank of England's 2 percent target
and also remained above economists' forecast of 2.2 percent.
Core inflation that strips out prices of energy, food, alcohol
and tobacco, edged up unexpectedly to 3.3 percent from 3.2 percent
in September. The core rate was seen at 3.1 percent.
At the November meeting, the Bank of England had reduced its
benchmark rate for the second time this year citing continued
progress in disinflation but suggested that further easing is set
to be gradual due to the upward impact on inflation from the Autumn
budget.
On a monthly basis, the CPI climbed 0.6 percent after remaining
unchanged in September.
Another data from the statistical office showed that input
prices fell 2.3 percent on a yearly basis in October, down from a
revised drop of 1.9 percent in September.
Monthly input prices gained only 0.1 percent in October,
reversing September's revised fall of 0.5 percent. Prices were
expected to climb 0.5 percent.
Factory gate prices were down 0.8 percent in October compared to
a revised fall of 0.6 percent a month ago.
Monthly output prices were flat in October after posting a
revised decline of 0.4 percent in September. Economists had
forecast a 0.1 percent fall.
European stock markets recovered a bit after posting sharp
losses in the previous session. Despite persisting concerns about
Russia - Ukraine conflict, investors are picking up stocks,
focusing on earnings and other corporate news, in addition to
assessing the regional economic outlook.
On the geopolitical front, the U.S. Embassy in Kyiv said it
would stay closed Wednesday after receiving a warning of a
potentially significant Russian air attack on the Ukrainian
capital.
The precautionary step came after Russian officials promised a
response to President Joe Biden's decision to let Ukraine strike
targets on Russian soil with U.S.-made missiles — a move that
angered the Kremlin.
The Greek and Spanish embassies in Kyiv have closed to the
public today, after air raid sirens were activated in the Ukrainian
capital several times overnight.
In the European trading now, the pound rose to a 6-day high of
1.2715 against the U.S. dollar, from an early low of 1.2673. On the
upside, 1.29 is seen as the next resistance level for the
pound.
Against the euro, the Swiss franc and the yen, the pound
advanced to 5-day highs of 0.8327, 197.80 and 1.1240 from early
lows of 0.8360, 196.24 and 1.1193, respectively. If the pound
extends its uptrend, it is likely to find resistance around 0.82
against the euro, 200.00 against the yen and 1.13 against the
franc.
Looking ahead, U.S. mortgage approvals data and U.S. EIA crude
oil data are due to be released in the New York session.
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