The British pound rose slightly, while the euro remained stable amid dollar weakening in anticipation of September US inflation data.
The British pound strengthened slightly on Wednesday, while the euro remained virtually unchanged. The weakening of the dollar was accompanied by caution among market participants ahead of the publication of US inflation data for September.
As of 12:10, the pound added 0.11 percent, and the euro was at 1.1196 after losing 0.03 percent.
On Tuesday, the dollar had a weak session. According to ING currency strategist Francesco Pesole, this was due to overheated positions and the recovery of global bonds. The strategist expects some recovery of the dollar today, especially if inflation turns out to be high.
The consensus forecast suggests an increase in the core consumer price index by 0.6 percent month-on-month and core inflation by 0.2 percent. The ING team forecasts 0.7 and 0.3 percent respectively. Annual inflation may accelerate to 3.6 percent from 3.4 percent due to rising energy prices.
President of the Federal Reserve Bank of New York John Williams expects another rate hike this year, but does not anticipate further tightening in 2027. Markets assess the probability of a rate hike in October at 20 percent.
Chief Economist of the Bank of England Hugh Pill is skeptical about expectations of four 25 basis point rate hikes next year. He noted the increased risk of self-sustaining inflation due to the conflict in the Middle East. Bank of England Governor Andrew Bailey previously pointed to the complication of the situation. Markets consider a rate hike in November virtually certain.
The euro returned to the 1.120 mark solely due to the weakening of the dollar. According to Pesole, the pair is not regaining momentum against other currencies due to French risks. ING has set a one-month target level for EUR/USD at 1.13, but allows for a retest of the 1.1150–1.1160 range in the coming days.