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  • Writer's pictureDenver Capital

Pound Soars as US Inflation Dives, Fueling Speculation of Rate Cuts.



Recent revelations of a steep decline in US inflation rates have triggered a significant surge in the value of the pound, sparking discussions about the possibility of interest rate reductions in the early months in the United States.


The Labor Department's Consumer Prices Index reported a sharp drop to 3.2 percent in October, notably lower than the preceding month's 3.7 percent and falling below the anticipated 3.3 percent.


Core inflation, which excludes the volatile food and energy prices, also saw a decrease from 4.1 percent to 4 percent, hitting its lowest level in a span of two years.


Capital Economics consultant Andrew Hunter highlighted that this downturn "signifies a rapid decline in underlying inflationary pressures."


Following the data release, the dollar experienced a significant decline, causing the pound to surge by over 1.4 percent against the global reserve currency, surpassing the $1.24 threshold.


The drop in both UK and US bond yields mirrored the market's expectations of potential interest rate cuts in the approaching spring. At one point, money markets indicated a 0 percent likelihood of a rise in US interest rates during the next Federal Reserve policymakers' meeting in December.

 

IMPORTANT: This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualised advice from a qualified professional.



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