Pound rallies after UK inflation data. All eyes now on the Fed.
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Daily Currency Update
The British pound has strengthened this morning following the release of the latest UK inflation data, which showed prices remained steady in August. The Consumer Price Index (CPI) recorded a 2.2% year-on-year increase, in line with July's figure. This has led markets to now estimate a 75% probability that the Bank of England will leave interest rates unchanged at tomorrow's policy meeting, up from around 65% prior to the data release. As a result, the pound has gained momentum, with GBP/USD climbing back towards 1.32 after dipping below that level yesterday afternoon. GBP/EUR has also recovered some of its losses from yesterday, currently trading at 1.1855.Key Movers
This evening at 7 PM UK time, the US Federal Reserve is set to confirm an interest rate cut, the first since the pandemic. The announcement is expected to trigger volatility, as it's uncertain whether policymakers will opt for a 25 basis point (bp) or 50 bp cut to initiate this easing cycle. While markets leaned slightly towards a 50 bp move yesterday, stronger-than-expected retail sales data has made the odds nearly even. All eyes will be on Fed Chairman Jay Powell's press conference for insights into the future of rate cuts, which could lead to significant swings in forex markets later tonight. For now, it’s likely to be calm ahead of the announcement, so limited movement is expected in EUR/USD, currently trading at 1.1125, until 7 PM.Expected Ranges
- GBP/USD: 1.3080 - 1.3300 ▲
- GBP/EUR: 1.1790 - 1.1910 ▲
- GBP/AUD: 1.9390 - 1.9600 ▼
- EUR/USD: 1.1045 - 1.1205 ▼