The greenback advanced for a second day as October consumer price figures fueled market expectations for Fed policy tightening, with traders fully pricing in a 25-basis-point hike for December. Meanwhile, the British pound hovered near a two-week low against the dollar, weighed down by higher Brent crude futures that hurt the net-energy-importing nation. Sterling did manage to stabilize against the euro at 83.6 pence following a four-day slide. Attention is now shifting toward British economic growth metrics as forecasters predict third-quarter growth of 0.7% quarter-on-quarter.
Key points
Persistent consumer price gains across three consecutive months are heavily driving expec…: Persistent consumer price gains across three consecutive months are heavily driving expectations for continued Federal Reserve policy tightening.
The Bank of England raised interest rates for the first time in three years, but inflatio…: The Bank of England raised interest rates for the first time in three years, but inflation may remain above target until 2030.
Upcoming gross domestic product data will be pivotal for British markets as economists pr…: Upcoming gross domestic product data will be pivotal for British markets as economists project third-quarter growth of 0.7%.
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Sterling eased 0.2% to $1.331, pinned near its lowest in two weeks and extending losses after a 0.7% drop in the last session.
The dollar index was up for the second straight day after data showed US consumer prices increased by more than expected in October and marked a third consecutive month of upside surprises.
The US currency firmed against most others, as traders fully priced in a 25-basis-point interest rate hike in December, with slim chances of an outsized 50-bp hike also on the cards, according to the CME FedWatch Tool.
Another potential headwind to the pound could be the rise in crude oil prices on Wednesday, given the UK's status as a net energy importer. Brent crude futures were 1.4% higher on the day.
Investors will be watching for Britain's latest gross domestic product data, due on Thursday. A Reuters survey of economists forecasts 0.7% quarter-on-quarter growth in the third quarter, which would be a pick-up from the previous period.
The Bank of England raised interest rates last Thursday for the…
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