Excel Currencies Blog

On Wednesday, the US released its latest inflation figures which showed for the second consecutive month, inflation has ticked higher. The rate was up 0.5% against forecast, so not the best of readings for the Fed who expect to hit their 2% target early next year. A rate hike may now be on the cards in the US next month, but it does remain unlikely at this stage.

Yesterday, the ECB announced a 25bp rate hike of their own, a 50-50 call before the release. Surprisingly, the £-€ rate jumped 0.3% on the data and in the meeting after, it was confirmed why. Dovish comments by ECB President Lagarde essentially saying that the higher rates are increasingly dampening economic growth, means this was probably the last rate hike of the cycle. 

Not only that, but the chances of rate cuts have increased for early next year, which weakens the single currency. The Pound has overall lost some value since the meet too, as traders bet the BoE will follow the ECB's lead next week. This means next Thursday is a real risk event for anyone selling GBP.