Forex News: Pound Rises As Robust U.K. CPI Data Fuels

Pound Rises As Robust U.K. CPI Data Fuels BoE Rate Hike

(RTTNews) - The British pound strengthened slightly against other major currencies in the European session on Wednesday, as the U.K. consumer price inflation rose to a one-year high in September on motor fuel prices, fueled expectations on the Bank of England (BoE) rate hike.

At its upcoming meeting on November 5, the BoE is projected to raise borrowing costs for the first time since 2023. Markets are now projecting three more rate increases over the course of the upcoming year.

Data from the Office for National Statistics showed that U.K. consumer prices registered an annual growth of 3.5 percent after rising 3.1 percent in August. The rate was the highest since last October and also came in above forecast of 3.4 percent.

Core inflation that excludes energy, food, alcohol and tobacco, accelerated to 2.8 percent in September from 2.6 percent in the prior month.

The CPI goods annual rate advanced to 3.2 percent from 2.7 percent and services inflation rose to 3.7 percent from 3.4 percent.

Month-on-month, consumer prices grew 0.4 percent, slightly slower than the 0.5 percent rise seen in August. Prices were forecast to rise 0.3 percent.

Another report from ONS showed that output price inflation hit the highest since April 2023. Factory gate prices were up 4.6 percent, following a revised 3.8 percent rise in August. On a monthly basis, output prices gained 0.8 percent after rising 0.7 percent a month ago.

Input price inflation rose to a four-month high of 8.3 percent in September from 6.7 percent in August. Monthly input prices moved up 1.5 percent, up from a revised increase of 0.5 percent in the prior month.

The UK budget deficit widened more than estimated in September. Public sector net borrowing increased to GBP 24.5 billion from GBP 22.8 billion in the previous year. This was GBP 1.9 billion above the Office for Budget Responsibility forecast as spending growth outpaced the increase in receipts.

In the financial year to September, borrowing decreased GBP 4.4 billion from the last year to GBP 97.8 billion.

European stocks may edge higher at open on Wednesday, with technology stocks likely to remain in focus as investors cheer robust earnings from SpaceX and Super Micro Computer.

In geopolitical news, media reports suggest that a new peace proposal put forward by Qatar and Pakistan has received positive responses from Washington and Tehran, raising hopes that a breakthrough to halt the war could be announced possibly this week.

Traders wait for the speech from European Central Bank (ECB) President Christine Lagarde later on Wednesday for fresh impetus.

In the European trading today, the pound rose to 0.8385 against the euro, 1.3386 against the U.S. dollar and 1.1052 against the Swiss franc, from early lows of 0.8397, 1.3364 and 1.1033, respectively. If the pound extends its uptrend, it is likely to find support around 0.82 against the euro, 1.36 against the greenback and 1.11 against the franc.

Against the yen, the pound advanced to 211.72 from an early low of 211.41. The pound rose earlier to a 1-12/-month high of 211.83 against the yen. On the upside, 212.00 is seen as the next resistance level for the pound.

Looking ahead, U.S. MBA mortgage approvals data and U.S. EIA crude oil data are slated for release in the New York session.

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