The British pound experienced a decline, nearing a seven-month low against the US dollar, as new economic data revealed a significant decrease in UK inflation. This development has implications for the Bank of England, the UK government, and the upcoming budget announcement. The US dollar continues to find support amid anticipation for upcoming jobs data, influencing broader currency market sentiment.
- The British pound fell to $1.305.
- This level is close to the seven-month low reached earlier in the month.
- UK headline inflation dropped to 3.6% in October.
- The inflation decrease was driven by lower household electricity and heating costs, and cheaper hotel prices.
- Services inflation eased to 4.5%.
- Core inflation moderated to 3.4%.
- Finance Minister Rachel Reeves plans to reduce living costs in the upcoming budget statement.
- The US dollar remains supported as investors await the key jobs report.
The recent softening of inflation, while beneficial to consumers and the government’s fiscal plans, places downward pressure on the pound. The expectation of potential interest rate cuts by the Bank of England, triggered by the cooling inflation, further contributes to this pressure. The strength of the US dollar, buoyed by anticipation of strong economic data, exacerbates the pound’s weakness, leading to a cautious outlook for the currency.