Currency Moves and Market Reactions off the Back of a Heavy Data Week.

GBP:

The British pound experienced a minor setback against both the dollar and euro in response to recent data indicating that UK inflation didn’t surge as initially expected in January. Despite holding steady at 4.0%, which was below economists’ forecasts of a 4.2% rate, concerns persist regarding domestic price pressures. Notably, while core inflation stubbornly remained high at 5.1%, there was a noticeable uptick in services inflation. This development could potentially apply pressure on the Bank of England to maintain a cautious stance on monetary policy.

USD:

Maintaining its three-month highs, the dollar index continued its strong performance, propelled by robust US consumer inflation data. Although headline inflation saw a slight easing, core inflation remained stable, thereby reducing the likelihood of a Fed rate cut. According to the US Bureau of Labor Statistics, the Consumer Price Index rose by 0.3% in January, with notable increases observed in shelter and food prices. The unexpected uptick in inflation raises uncertainties regarding the Federal Reserve’s future rate decisions.

EUR:

Following reports of lower-than-expected UK inflation figures, the Pound to Euro exchange rate witnessed a decline. Europe’s economic outlook remains bleak, with expectations of potential rate cuts by the European Central Bank. Positive UK employment data exerted downward pressure on the EUR/GBP pair, indicating further potential setbacks for the euro against the dollar. Market watchers anticipate continued monitoring of UK CPI and GDP data for clarity on the pound’s trajectory.