British inflation data hurts pound, dollar firm on Fed outlook, potential Trump victory – ThePrint – ReutersFeed

(Refile to add discarded FOREX tag, no changes to text)

By Alun John and Kevin Buckland

The pound was down 0.65% against the dollar at $1.2988, falling below the $1.30 level for the first time since August 20, after data showed that the annual consumer price inflation rate fell to 1.7% in September from 2.2% in August.

That was the lowest reading since April 2021, falling short of the 1.9% forecast in a Reuters poll of economists. It reinforced bets on a BoE interest rate cut next month and made a new cut in December more likely.

“The data is unequivocally dovish for the Bank of England and paves the way for rate cuts at the remaining two meetings this year,” said Francesco Pesole, currency strategist at ING.

“We think this has opened the door to a period of sterling underperformance,” he said, adding that they see the pound trading well below $1.30 and the euro above 84 pence.

The common currency was up 0.6% against the pound at 83.80 pence.

SOLID DOLLAR

Moves elsewhere were less dramatic, but the euro fell a further 0.1% against the dollar to $1.0883, the lowest level since August 2, extending its declines in recent weeks as Traders priced in the Federal Reserve’s rate cuts and factored a potential election victory for former President Donald Trump – seen as dollar positive – into their thinking.

Investors will be watching Thursday’s European Central Bank meeting closely, although if policymakers present the current 25 basis point rate cut and President Christine Lagarde refrains from giving too many clues about the future rate outlook , the impact on the market could be mitigated.

Across the Atlantic, traders are currently setting odds of 92% for a 25 basis point cut when the Fed decides its next policy on November 7, with an 8% probability of no change, according to the tool. CME Group FedWatch. A month ago, traders were seeing better than 29% odds of a whopping 50 basis point drawdown.

Market prices still strongly favor a full 50 basis points of easing this year, but comments from central bankers overnight were more aggressive. Raphael Bostic of the Atlanta Fed said he only planned a 25 basis point rate cut for this year, while Mary Daly of the San Francisco Fed said “one or two” cuts in 2024 would be “reasonable.”

The dollar rose 0.1% to 149.345 yen, not far from Monday’s high of 149.98 yen, the strongest since August 1.

BOJ board member Seiji Adachi said on Wednesday the central bank should raise rates at a “very moderate” pace and avoid premature hikes, given uncertainties about the global economic outlook and domestic wage developments.

The Australian and New Zealand dollars fell as skepticism grew over stimulus from top trading partner China.

The Aussie fell as much as 0.51% to $0.6669, the lowest level since September 12, before recovering to $0.6703, while the Kiwi fell as much as 0.69% to $0. .6041, a level last seen on August 19.

On Saturday, China’s Finance Ministry said it would increase lending, without saying when or by how much. China will hold a press conference on Thursday to discuss promoting the “stable and healthy” development of the real estate sector.

“There has definitely been some growing skepticism about China’s real commitment to the kind of fiscal support that would be seen as really cathartic,” and which is dragging down the Australian and New Zealand currencies this week, said Ray Attrill, head of National’s foreign exchange strategy. Bank of Australia.

New Zealand’s currency was also further pressured by data showing cooling inflation, keeping the door open for aggressive easing by the central bank.

(Reporting by Alun John in London and Kevin Buckland in Tokyo; Editing by Jamie Freed, Sherry Jacob-Phillips and Angus MacSwan)

Disclaimer: This report is automatically generated by the Reuters news service. ThePrint is not responsible for its content.