Daily digest market movers: Pound Sterling outperforms its all major peers
- The Pound Sterling jumps above 1.2700 against the US Dollar (USD) in Wednesday’s London session after the UK CPI report for October showed that inflation came in higher than expected.
- The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, steadies above the immediate support of 106.10, with investors looking for fresh cues about the Federal Reserve (Fed) interest rate path in 2025.
- Given the fact that President-elected Donald Trump’s victory in both United States (US) will allow him to execute his economic agenda smoothly, market participants expect the Fed to follow a more gradual policy-easing cycle. US inflation and economic growth are expected to revamp when Trump takes office as policies such as higher import tariffs and lower taxes are expected to boost demand for domestic products and employment.
- Fed officials have refrained from providing projections about the likely impact of Trump’s policies on the economy. Also, they are confident about inflation remaining on a sustainable track towards the bank’s target of 2%.
- For the December meeting, the probability for the Fed to reduce interest rates by 25 basis points (bps) to 4.25%-4.50% has diminished to 59% from more than 82% a week ago, according to the CME FedWatch tool. Market expectations for Fed interest rate cuts diminished after Fed Chair Jerome Powell said last Thursday that the economy "is not sending signals that US central bank needs to be in a hurry to lower interest rates.”
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