The GBP/USD currency pair settled above Friday’s low of 1.3287, its weakest level since October 14th, after a surprise surge in UK retail sales and as the latest US CPI data added to expectations of more Federal Reserve interest rate cuts.
The report, which has been delayed by the US government shutdown, showed that annual headline consumer inflation had picked up to 3% in September, the highest rate since January, from 2.9% in August. Yet, the acceleration was slower than forecasts of 3.1%.
Annual core CPI inflation eased to 3% in September from 3.1% in August.
Markets are now pricing in about a 94.5% chance of a 25 basis point Fed rate cut in October and a 92% chance of another 25 bps cut in December.
Meanwhile, UK retail sales volumes grew 0.5% month-over-month in September, confounding market consensus of a 0.2% drop, following a revised up 0.6% growth in August.
This way, sales were brought to their highest level since July 2022.
In other data, UK’s manufacturing sector registered the weakest contraction since October 2024 in October, as businesses recorded the fastest production growth since September 2024.
And, UK’s services sector growth remained slow in October, flash PMI data showed.
Yet, the business survey “brings hope that September was a low point for the economy from which business conditions are starting to improve,” S&P economist Chris Williamson noted.
The major Forex pair lost 0.85% for the week.
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