Sterling Sinks As UK Inflation Plummets
London: 20 December 2023 (TraderMade): The British pound tumbled after UK inflation unexpectedly nosedived in November, sparking a frenzy of rate cut expectations. UK inflation plummeted to 3.9% in November, the lowest since 2021.
Headline inflation sunk to 3.9%, the lowest since September 2021, shattering forecasts and catching markets off guard. Markets scramble to price in earlier BoE rate cuts, May 2024 now fully expected, March even possible. Dovish shift rewrites narrative - BoE less hawkish than Fed and ECB? Sterling slumps despite earlier strength.
Sterling - previously buoyed by relative hawkishness, slumped against the dollar and the euro. At about 10:35 AM GMT, the GBPUSD pair declined by 0.555% to 1.26612. Similarly, the EURGBP pair climbed 0.28% to 0.86482.
UK stocks and bonds soared on the inflation surprise - the FTSE100 hit its highest levels since May. FTSE 100 (UK100) surged by 0.51% to 7714.4 - compared to its close yesterday.
Key takeaways:
- Pound down on dovish hopes.
- Inflation plunge fuels rate cut bets.
- BoE's stance relative to other central banks in question.
- UK markets cheer lower inflation.
