Data-wise, US CPI inflation in September exceeded expectations. The headline rate fell to 2.4% (vs. 2.3% forecast), while core-CPI increased to 3.3% (vs. 3.2% expected). Meanwhile, initial unemployment claims increased to 258k from 225k.
Overall, the signs suggest that the Fed will lower rates gradually. In addition, the most recent ECB meeting minutes indicate that the Governing Council supports a gradual pace of rate decreases. However, recent comments by ECB officials have opened the door to a faster rate of lowering.
The British Pound is expected to decline next week as inflation falls below the 2.0% target once again. Many believe UK headline CPI inflation will fall below the Bank of England’s 2.0% target when September numbers are released on Wednesday next week.
However, for those who require a stronger Pound Sterling, the move could be another disappointment, since it may prompt the Bank of England to accelerate the rate at which interest rates are reduced.
UK GDP increased by 0.2% in August, as expected, according to data released this morning. However, the July reading was cut down to +0.3% from +0.5%. The data had no influence on sterling in early trading. The rest of today’s data calendar is quiet.
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