Sterling fell 0.42% against the dollar to 1.3195 on Wednesday after U.S. core inflation came in above expectations. The pound's decline appeared driven mainly by dollar strength rather than UK-specific factors.
Sterling fell 0.42% against the dollar to 1.3195 at 09:15 ET (12:15 GMT) on Wednesday as stronger-than-expected U.S. core inflation supported the greenback. The euro also weakened, dropping 0.71% to 1.1120.
Core prices rise faster than forecast
U.S. consumer prices rose 0.6% in September after increasing 0.4% in August. Annual inflation accelerated to 3.7% from 3.4%, and both figures matched forecasts.
Core prices, however, rose 0.3% for a second consecutive month, above expectations for a 0.2% increase. Annual core inflation climbed to 2.6% from 2.4%, compared with forecasts of 2.5%.
In a pre-release note, Francesco Pesole, FX strategist at ING, said hotter inflation could reinforce expectations of further monetary tightening and, in turn, support the dollar.
Fed pricing and officials point to another hike
Before the release, Jefferies said markets had priced in a 20% chance of an October Federal Reserve rate hike and a fully priced December increase. New York Fed President John Williams said he expected another rate hike this year but saw no further tightening in 2027.
The next U.S. inflation report is due on November 10.
Pound slides on dollar strength as euro also weakens
The pound's decline appeared to be driven primarily by dollar strength rather than UK-specific factors. Bank of England Governor Andrew Bailey said on Tuesday that "the longer this goes on, the harder it gets." Markets viewed a November rate hike as almost certain.
Pesole wrote that EUR/USD had climbed back to the 1.120 handle, which he attributed entirely to a softer dollar. ING has a one-month EUR/USD target of 1.13.
Source: Investing.com
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