Home Daily Commentaries UK inflation data shows a further cooling this morning

UK inflation data shows a further cooling this morning

Conor Fleming
Written by
Conor Fleming

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor spearheads initiatives to encourage businesses in Germany, Switzerland, and Austria to hedge their foreign currency risks with OFX.

| Wednesday 20 March, 2024

Daily Currency Update

In Europe yesterday Germany published their March ZEW survey ( economic sentiment data ) which improved slightly to 31.7 and the Eurozone's similar survey surged to 33.5 beating market estimates. The euro has been trading in a tight range vs the Dollar and Pound as markets await the Federal Reserve's interest rate decision this evening.

In the UK CPI ( Consumer Price Inflation ) was released this morning. The data showed that inflation has fallen yet further with yearly data showing a drop from 4% to 3.4%. The Pound's reaction has been relatively muted this morning.

All eyes in the US are on the Federal Reserve's interest rate decision this evening. Markets expect no change to rates but the rhetoric around future guidance will be crucial in determining the future path of the US Dollar. The Federal Reserve has made it clear that all decisions on interest rates will be data dependent.

Key Movers

The euro will experience heightened volatility over the next few days after the Federal Reserve announces its interest rate decision this evening. Over the last week, European Central Bank council members have been more dovish in their comments and seem to be aligned for the first rate cut in Europe in several years.

After the release of UK CPI this morning the markets eyes will turn to the Bank of England’s monetary policy meeting to set interest rate policy tomorrow. After this morning's inflation data shows another decrease this will most likely lift expectations for a rate cut in the UK sooner than previously expected.

Markets are expecting the Federal Reserve to strike a more hawkish tone in their minutes after the interest rate decision this evening which could lead to further Dollar strength as we move through this week. Economic data has been strong but inflation remains high which suggests the market may not see as many interest rate cuts from the Fed this year.

Expected Ranges

  • GBP/USD: 1.2660 - 1.2760 ▲
  • GBP/EUR: 1.1650 - 1.1750 ▼
  • GBP/AUD: 1.9430 - 1.9530 ▼
  • EUR/USD: 1.0830 - 1.0930 ▲

Written by

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor first embarked on his financial career journey as a trainee dealer in BNP Paribas in the early 90s. His professional journey also took him to New York, where he assumed the role of Head of Sales with an Irish bank for a few years. During his tenure at both banks, he was invited to several interviews on Irish television to discuss market turbulence, the factors driving volatility and insights into what could be expected as events unfolded.