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by GBPUSD Fundamental Analysis – The British pound slightly increased to nearly $1.25, recovering from its lowest point in five months. This rise was driven by new data indicating that UK inflation remains stronger than anticipated, suggesting that high-interest rates might persist longer under the Bank of England’s oversight.
Pound Rises as UK Inflation Stays High
UK Inflation Drops but Exceeds Market Forecasts
In March, the UK’s Consumer Price Index (CPI) dropped to 3.2%, marking the lowest inflation rate since September 2021. Despite the decline, this figure still surpassed market expectations, which had predicted inflation to settle at 3.1%. Moreover, the core inflation rate—which excludes volatile items like food and energy—also fell to a two-year low of 4.2%, slightly above the forecasted 4.1%.
Across the pond, the US dollar maintained its robust stance. This strength is largely attributed to recent comments from Federal Reserve Chair Jerome Powell. He indicated that the U.S. central bank plans to keep interest rates elevated significantly due to a strong labor market and progress in managing inflation.
These developments have led traders to adjust their expectations regarding the future path of interest rates. In the UK, predictions now suggest that the benchmark interest rate will decrease to around 4.75% by the end of 2024, down from the current rate of 5.25%. Such adjustments in monetary policy expectations significantly affect currency values and international economic dynamics.
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