The British pound surged past the $1.33 mark on Monday, reaching its highest level in seven months, as broad U.S. dollar weakness offset softer-than-expected UK inflation figures.
Consumer price inflation in the UK cooled to 2.6% year-on-year, while services inflation moderated to 4.7%, easing some of the pressure on the Bank of England. The slowdown in price growth prompted traders to increase bets on monetary easing, with market pricing now reflecting 86 basis points of rate cuts by year-end, and rising speculation of a fourth cut in December.
The latest data signal greater policy flexibility for the BoE as it navigates headwinds from strained global trade conditions and persistent cost-of-living challenges at home.
Meanwhile, the U.S. dollar index fell to a three-year low, dragged down by mounting investor concerns over the Federal Reserve’s independence and potential economic fallout from escalating global trade tensions.
