The British currency retreated toward a two-week low near $1.331 while finding some stability against the euro at 83.6 pence. Pressure mounted as Brent crude futures gained 1.4%, weighing heavily on the UK's net energy importing economy. Although the Bank of England recently initiated policy tightening, long-term price concerns persist, with an academic think-tank warning inflation may not hit target levels before 2030 due to war-related wage pressures. Investors are now turning their attention toward forthcoming third-quarter gross domestic product data to gauge domestic economic health.
Key points
Financial markets have fully priced in a 25-basis-point interest rate hike from the Feder…: Financial markets have fully priced in a 25-basis-point interest rate hike from the Federal Reserve this December.
A prominent academic think-tank projected that the Bank of England will fail to bring inf…: A prominent academic think-tank projected that the Bank of England will fail to bring inflation back to target before 2030.
The pound managed to stabilize against the euro at 83.6 pence following four consecutive…: The pound managed to stabilize against the euro at 83.6 pence following four consecutive sessions of losses.
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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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