The British Pound (GBP) has retreated from a six-month high, easing to around 1.3230 against the US Dollar (USD) during Thursday’s Asian session, after briefly touching 1.3292 the previous day. The currency pair’s rally was halted as traders await key US economic data due later in the day, including Building Permits, Housing Starts, the Philly Fed Manufacturing Index, and weekly Initial Jobless Claims.
The US Dollar Index (DXY) is trading higher, nearing 99.60, bolstered by stronger-than-expected consumer spending in March. US Retail Sales rose by 1.4%, surpassing both February’s 0.2% gain and the forecasted 1.3% increase, indicating robust consumer demand.
The Pound, however, is facing downward pressure following the release of softer-than-expected UK Consumer Price Index (CPI) data for March. Headline inflation rose 2.6% year-over-year, falling short of the expected 2.7% and lower than February’s 2.8%. Core CPI, which excludes volatile food and energy prices, rose 3.4%, matching forecasts but slightly down from 3.5% in February. On a monthly basis, headline CPI rose by 0.3%, missing estimates and February’s 0.4% increase.
Of particular concern for the Bank of England (BoE) is the slowing services inflation, which eased to 4.7% from 5.0%. This further strengthens expectations for a potential rate cut during the BoE’s May policy meeting. Additionally, the outlook for the UK labor market remains bleak, further compounded by the recent increase in employers’ national insurance contributions, which could prompt further monetary easing by the BoE.
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