Soft UK CPI weighs on GBP as markets await delayed US data
Daily Currency Update
Sterling’s underperformance has been the dominant theme this week, reinforced by yesterday’s UK CPI, inflation, and consumer confidence data. The pound extended its sell-off, hitting November lows against the dollar and fresh year-to-date lows versus the euro, after headline inflation eased to 3.6% in October from 3.8%. Core inflation has now fallen for five consecutive months and is nearing pre-2022 averages.The data does little to change expectations for a Bank of England rate cut in December and, if inflation continues to cool, gives policymakers more scope to begin a cutting cycle into 2026.
Consumer sentiment saw its sharpest drop since April, with households wary of potential tax changes ahead of this month’s Budget. Ongoing political debate around a possible mansion tax and broader fiscal tightening also weighs on sterling. Still, some analysts argue the currency is oversold in the medium term and could rebound as domestic conditions stabilise and the dollar eventually weakens.
Key Movers
The US dollar is trading firmer this morning after the latest Fed minutes showed clear disagreement among policymakers about whether to cut rates again in December.The October meeting produced a three-way split including the proposals of a 50-basis-point cut alongside calls for no cut at all. Ultimately the committee we able to settle on 25 basis points however the minutes highlighted that while most officials still expect more easing ahead, several felt December may be too soon, and many preferred to keep rates unchanged for the rest of the year.
That uncertainty has been amplified by the Bureau of Labor Statistics confirming that there will be no October jobs report due to Gov. shutdown. This means today’s September non-farm payrolls are unusually important going into the December meeting. At the moment, markets are pricing only around a 25 percent chance of a December rate cut, which is helping to keep the dollar supported.
The euro remains steady with limited direction from domestic data. German producer prices fell 1.8 percent year-on-year, mostly due to lower energy costs, and that doesn’t shift expectations for the ECB.
With a very quiet European calendar today, the euro is largely taking its cues from broader market sentiment. Political uncertainty in France continues, with the Prime Minister facing a potential rejection of the 2026 budget, and although markets haven’t reacted strongly, prolonged gridlock could eventually weigh on European assets.
Expected Ranges
- GBP/USD: 1.3035 - 1.3105 ▼
- GBP/EUR: 1.1315 - 1.1375 ▼
- GBP/AUD: 2.0105 - 2.0202 ▼
- EUR/USD: 1.1510 - 1.1560 ▼