Good morning,

After reaching 2-month and 18-month highs against the US dollar and the euro on Tuesday, GBP gains were halted after UK inflation figures came in softer than expected, and impacted the Bank of England’s rate hike expectations for November.

The UK’s Office for National Statistics reported that the annual Consumer Price Index (CPI) edged lower to 3.1% in September from 3.2% in August and the 3.2% expected by markets. Furthermore, the Core CPI which excludes the volatile food and energy prices, retreated to 2.9% from 3.1%.

As a result, the likelihood of a 25-basis point rate increase has decreased from 59% to 32%, according to CME Group’s BoE Watch tool. Nevertheless, the probability of a rate hike before the end of the year stays unchanged at 70%.

Across Europe the annual CPI stayed unchanged at 3.4% as the EUR-USD pair stays relatively calm above 1.16 and attention will now move across the pond to the US weekly jobless claims.

In other news, fears that the Chinese property giant Evergrande may default as they missed a second bond interest payment of $47.5m, having missing $83.5m in payments last Thursday, will lift the US dollar’s safe haven demand.

Have a good day.

Joseph Sidders, Relationship Manager.

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