The BoE hinted that the UK is still on course for an interest rate cut, as recent data showed a further easing in the pace of price growth in the economy. On Wednesday, the Office for National Statistics showed that the UK Consumer Price Index inflation dropped to 3.2% in the 12 months to March, the softest level for two-and-a-half years. The figure was down from the previous reading of 3.4%. However, investors expect the first rate cut in August or September, according to the LSEG data.
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The Core HICP showed a 2.9% rise YoY also in line with flash estimates, from 3.1% in February. Month-on-month readings were also in line with initial estimates. The lack of change in the final estimate may have taken the heat out of increasingly dovish expectations regarding interest rates. A rate cut in June is now widely expected, and since lower interest rates, or their expectation, tend to reduce foreign capital inflows, this has been depreciating the Euro.
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On the Dollar front, the upbeat February’s Retail Sales earlier this week suggested a robust economy in the United States. The report triggered speculation that the Federal Reserve might delay its easing cycle this year. The Fed Chair Jerome Powell stated that he will wait longer than previously expected to cut rates after unexpectedly upside inflation readings. Powell added that the US central bank will likely take more time to gain confidence that price growth is headed toward the Fed’s 2% target before lowering borrowing costs.
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