British Pound Backflips as Market Digests US CPI and Possible Fed Actions

The British Pound gained against the US Dollar after the US CPI was hotter than expected. To convert from US Dollar to GBP, you can use an advanced currency converter. It uses the spot rate provided by the Bank of England.

Economic reports affect the GBP the most
In trading forex, the pound’s price often changes with the news of various economic reports. Many people choose to focus their efforts on fundamentals, and these economic reports are important in providing guidance for traders in which areas to focus on. This article aims to highlight a few of the most important reports that have the potential to affect the pound’s value.

Stock markets volatile ahead of U.S. CPI report
Investors are closely monitoring the September Consumer Price Index, which will give them a clue about whether the Federal Reserve will raise interest rates. According to a Bloomberg survey, the index is expected to increase 8.1% year-over-year in August, down from its 8.7% increase in July. The report also shows that the core CPI (a measure of inflation excluding food and energy costs) is expected to remain steady at 6.5%.

U.S. CPI printed at 8.2% y/y vs. 8.1% forecast
Today’s British pound backflip has caught investors off guard. The GBP/USD pair plunged, recovering some of the losses in the North American session, before dropping again. It’s currently at 1.1856 – down 0.28% – as of this writing. There are a number of economic reports due today, including UK inflation data and the US CPI.

Possible Fed action
The British Pound has taken investors on a roller coaster ride today. The pair initially fell, but recovered by the North American session, and is now trading at 1.1856. It is down 0.28% from its opening level, but there is an active economic calendar today. Traders will be digesting the UK’s latest release and the US’s CPI report.

UK government borrowing costs fall sharply
Despite recent signs of a slowdown in the economy, the UK government has backed away from its controversial tax cuts plan. The market’s response to the UK government’s decision triggered a selloff in UK bonds. The move spread to the global treasury market. Fears of rising interest rates and inflation are driving the selloff, according to City economists. But the UK’s unfunded tax cuts are also responsible, say experts. The UK’s deputy governor of financial stability suggested last week that the most recent movements in the UK bond market had been triggered by Kwarteng’s unfunded promises. Kwarteng has now brought forward a debt-cutting statement, along with new forecasts from the Office for Budget Responsibility.

Sterling rallies in Asian trade
The pound has rallied to its strongest level since mid-June against the dollar. This was a turnaround from last week’s slump after the Bank of England stepped in to calm markets. Also, the Northern Ireland’s Democratic Unionist Party has privately decided to support Theresa May’s Brexit deal – a move which could strengthen the pound. The currency has been under pressure due to Brexit uncertainty and growing pessimism in the global economy.