Daily digest market movers: Pound Sterling drops against US Dollar ahead of US inflation... dari ia7145

15 Aug 2024, 19:34 · Views 65

The Pound Sterling slumps to near 1.2820 against the US Dollar (USD) in Wednesday’s European trading hours. The GBP/USD pair drops as the British currency weakens after the release of the UK’s soft inflation report. Meanwhile, the near-term outlook of the US Dollar is also uncertain ahead of the US CPI data for July, which will be published at 12:30 GMT.
The US Dollar index (DXY), which tracks the Greenback’s value against six major currencies, edges higher to near 102.67 in Wednesday’s European session after correcting to a fresh weekly low at 102.55 on Tuesday.
US annual headline and core inflation is expected to have decelerated by one-tenth to 2.9% and 3.2%, respectively, with monthly figures growing by 0.2%. The data inflation will significantly influence market expectations for Fed interest-rate cuts for the remainder of the year.
The US Dollar recorded a sharp sell-off on Tuesday after a mostly soft Producer Price Index (PPI) report for July increased market expectations for the Federal Reserve (Fed) to start reducing interest rates more aggressively.
According to the CME FedWatch tool, 30-day Federal Funds Futures pricing data shows that traders see a 54.5% chance that interest rates will be reduced by 50 basis points (bps) in September. The likelihood of a 50 bps rate reduction has slightly increased after the PPI report release, but is still significantly down from the 69% recorded a week ago.
The PPI report showed that headline producer inflation came in at 2.2%, lower than estimates of 2.3% and June’s reading of 2.7%. In the same period, the core PPI grew at a slower pace of 2.4% from expectations of 2.7% and the former release of 3%. A sharp decline in the pricing power of owners at factory gates boosted confidence of investors that inflation is on track to return to the desired rate of 2%.

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