The British pound was poised to achieve its most significant single-day advance in nearly two weeks on Wednesday, following the release of data demonstrating the enduring strength of British core inflation in July. In contrast, the yuan slid to its lowest point in nine months amid mounting concerns over a deepening growth slowdown.
Meanwhile, the yen struggled within a pivotal intervention range, maintaining trader vigilance. On another front, the New Zealand dollar received support after the central bank slightly extended its anticipated timeline for the commencement of borrowing cost reductions.
As of the latest update, the pound had gained approximately 0.3%, reaching $1.2747, which could potentially mark its most substantial single-day increase since August 7.
The core inflation in the UK, which excludes the volatile components of energy and food prices, remained at 6.9% in July. This figure mirrored the reading from June and surpassed expectations from a Reuters poll, which had forecasted a reading of 6.8%.
Given that inflation remains significantly above the Bank of England‘s 2% target, analysts suggested that there is still room for the central bank to raise rates, even if it poses a risk to economic growth.
Niels Christensen, Chief Analyst at Nordea, commented, “Core inflation and services inflation are too high. It all indicates that the Bank of England will have to move rates higher in September. I’m surprised it (sterling) hasn’t gained more ground. (The market is) locked between hike expectations supporting sterling and fear of a weaker economy weighing on sterling.”
