Sterling Slumps Amid Inflation and Rate Cut Speculations

Sterling fell to a two-month low as British inflation data suggested potential rate cuts by the Bank of England. Concurrently, the euro hit a 10-week low ahead of a European Central Bank meeting. The dollar remains strong, with the Federal Reserve's forthcoming rate decisions closely monitored.

Sterling took a hit, diving to its lowest level in two months, following unexpectedly soft British inflation data that bolstered the case for rate cuts by the Bank of England. The pound dropped to $1.2984, breaching the $1.30 mark for the first time since August 20, as September's annual consumer price inflation rate slid to 1.7% from August's 2.2%.

The dip, the lowest since April 2021 and below a 1.9% forecast by a Reuters poll, heightened speculation of a BoE interest rate cut next month, with further reductions anticipated in December. Despite marginal recovery in Europe’s morning trade, sterling remained subdued, recording a 0.42% daily decline at $1.3018.

In contrast, the euro gained 0.44% on the pound at 83.67 pence, while maintaining $1.0891 against the dollar. Traders refrained from factoring in Federal Reserve rate cuts, sensitive to potential market shifts from a possible re-election of Donald Trump. As attention turns to the ECB's Thursday meeting, a predictable 25 basis point cut might elicit little market movement.

(With inputs from agencies.)