The British Pound experienced losses, reaching its weakest level in a week against the dollar. Lower than expected inflation data is driving speculation that the Bank of England may implement interest rate cuts sooner than previously anticipated. While this may offer some relief to the Chancellor and her upcoming budget, government borrowing remains above forecasts.
- Sterling extended losses toward $1.33, its weakest level in a week.
- Inflation held steady at 3.8% in September, below the forecast of 4%.
- Core inflation edged down to 3.5% from 3.6%, also undershooting expectations.
- Government borrowing totaled £99.8 billion in the first half of the fiscal year, above forecast.
- Markets now anticipate that the Bank of England could start cutting interest rates early next year.
The information suggests a weakening outlook for the British Pound. Disappointing inflation figures are fueling expectations of earlier interest rate cuts, diminishing the currency’s appeal. The combination of moderating inflation and signs of a cooling labor market creates an environment where the central bank might feel compelled to ease monetary policy, further pressuring the Pound.