UK inflation eases, Powell pushes back on cuts

UK data continues to pressure the sterling

By Nadia Elbilassy | @Nadia Elbilassy | 17 April 2024

Market open
  • Powell's remarks on Fed rate cuts led to initial Asian stock decline, but later rebounded.

  • US futures rose despite S&P 500's recent declines; European contracts also showed positivity.

  • GBP/USD rose as UK inflation eased in March, but UK unemployment rate increased, potentially impacting BoE rate decisions.

What’s moving markets?

Jerome Powell indicated overnight that the Federal Reserve is willing to postpone rate cuts as necessary. Powell's hawkish remarks initially led to a decline in Asian stocks at the market opening, although the MSCI Asia Pacific Index later rebounded. However, it remains on the brink of wiping out its gains for the year.

US futures saw an uptick following the S&P 500's third consecutive session decline, while European contracts also showed positive signs.

Meanwhile the dollar was trading in a tight range near its 5 month peak of 106.

UK data

The GBP/USD rose to 1.2450 in the European session after UK inflation eased in March. The UK CPI eased to 3.2% in March down from 3.4% in February. While Core CPI slowed down to 4.2% down from 4.5% in February.

The Consumer Prices Index including owner occupiers' housing costs (CPIH) saw a 3.8% increase in the twelve months leading up to March 2024, remaining unchanged from February.

The primary factor contributing to the decline in both the CPIH and CPI annual rates on a monthly basis was food, which experienced a lesser price increase compared to the previous year. Conversely, motor fuels made the most significant, albeit partially offsetting, upward contribution, with prices rising this year after experiencing a decline the previous year.

This comes in after UK unemployment rate rose to 4.2% from 3.9% in the 3 months leading to February and Regular wages slowed down.

Still the sterling may continue to face pressure on signs that the BoE may cut rates sooner than expected based on labor market data.