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2025-10-23 19:53:35
[Pound's Decline Pauses! Cooling Inflation Rewrites the Bank of England's Rate Hike Path] ⑴ The British pound edged down 0.13% to 1.3339 against the US dollar on Thursday, stabilizing somewhat from a low of 1.3307 reached after Wednesday's inflation data. ⑵ UK inflation unexpectedly remained stable at a low level in September, prompting traders to bring forward bets on the timing of a Bank of England rate cut. ⑶ The market currently sees a three-quarter probability of a 25 basis point rate cut in December, with a relatively low probability of action at the November meeting. ⑷ The 10-year UK gilt yield remained around 6 basis points lower than before the data release, but the pound's decline was more limited than the yield drop. ⑸ Analysts point out that lower yields will ease budget pressure on the Chancellor of the Exchequer, and the budget later this month is likely to include a combination of tax increases and spending cuts. ⑹ The euro fell back to 86.88 pence against the British pound, a significant pullback from Wednesday's high of 87.11 pence. ⑺ Currency strategists believe that the pound still faces downside risks. The acceptance of the budget and the speed at which the French political risk premium disappears will be key factors. ⑻ Despite the shift in interest rate expectations, the improvement in fiscal conditions due to the decline in government bond yields has provided some support for the pound.
