British Pound Pulls Back as U.K Inflation Eased to 2.8%
British pound pulled back against the US dollar after consumer prices eased more than expected in February. Data showed that UK inflation slipped back from 3.0% to 2.8% in February. Inflation slowdown is expected to be temporary, with the central bank anticipating inflation to rise toward 4% later this year.
This is coming as US dollar begins to see some light after bearish performance that started earlier in the year. In the last three months, the sterling has climbed by 6.5%, jumping from $1.21 to current market rate in the forex markets.
The trade war actually resulted in slowed demand for US dollar as American trading partners continue to search for alternatives measure to deal, and or protected impacts of tariffs hikes.
On Wednesday, the sterling dropped to $1.2900 from a session high of $1.29, marking a session low of $1.2890. ING analyst said there are tentative signs that the forthcoming rise in employer National Insurance is having an impact on service sector inflation, which came in a tad higher than expected in February.
A slowdown in inflation is expected to keep the Bank of England on track for three further rate cuts this year while UK Chancellor, Rachel Reeves mulls spending cut. Ahead of April 2 reciprocal tariffs implementation, the US dollar index (DXY) found support under 104.00 helped by a little more stability in US asset markets.
UK Chancellor, Rachel Reeves, delivers her 30-minute Spring Statement about how she will likely cut spending for the UK to meet its fiscal rule. Analysts noted that widely trailed in the press is the need to rein in about £15 billion of spending through welfare and other departmental spending cuts.
With UK 10-year gilt yields already at 3.75% and underperforming US Treasuries, any £320 billion gilt issuance figure – likely announced today – would hit sterling, ING analyst Chris Turner said. Seplat Energy Trades Flat Despite Price Sensitive Corporate Actions
