The British pound (GBP) is trading at the bottom of the pack against its major rivals on Monday, as investors continue to worry about the UK’s economic outlook.

The pound is currently trading at 1.186 against the US dollar (USD), 1.176 against the euro (EUR), and 1.315 against the Japanese yen (JPY).

There are a number of factors weighing on the pound, including the UK’s high inflation rate, the ongoing cost of living crisis, and the uncertainty surrounding Brexit. The Bank of England (BoE) is expected to raise interest rates again on Thursday, but this is unlikely to do much to boost the pound in the near term.

FTSE 100 Enjoying a Breaking of Med-Term Resistance as Cable Pushes Lower

The FTSE 100 is enjoying a break of medium-term resistance on Monday, as the pound (GBP) pushes lower against the US dollar (USD).

The FTSE 100 is currently trading at 7,234, up 0.8% on the day. The pound’s weakness is helping to boost the FTSE 100, as it makes UK-listed companies more attractive to foreign investors.

The FTSE 100 is also being supported by strong earnings from a number of companies, including Shell and BP.

US Equities Trade to 15-Month Highs as Earnings Show Little Signs of Recession Risks

US equities are trading at 15-month highs on Monday, as earnings from a number of major companies show little signs of recession risks. The S&P 500 is currently trading at 3,900, up 1.2% on the day.

The earnings season has so far been better than expected, with a number of companies reporting strong results. This is helping to boost investor confidence and support the stock market. The US economy is facing a number of headwinds, including high inflation and rising interest rates.

However, the strong earnings season so far suggests that the economy is still growing and that companies are still doing well.

Overall, markets are mixed on Monday, with the pound trading to the bottom of the pack, the FTSE 100 enjoying a break of medium-term resistance, and US equities trading to 15-month highs.

Investors are continuing to worry about the UK’s economic outlook, but the strong earnings season so far is helping to support the stock market.

The British Pound Falls on Faster-Than-Expected Drop in Inflation

The British pound (GBP) fell sharply on Tuesday morning after the latest release of UK CPI data showed a faster than expected fall in price pressures. The pound was trading at 1.180 against the US dollar (USD) at the time of writing, down 0.6% from its previous close.

The UK CPI data showed that inflation fell to 9.4% in June from 9.1% in May. This was below the consensus forecast of 9.5%. The drop in inflation was driven by a number of factors, including the recent fall in energy prices.

The faster-than-expected drop in inflation is good news for consumers, but it is bad news for the pound. The pound has been propped up recently by expectations that the Bank of England (BoE) will continue to raise interest rates in an effort to combat inflation.

However, the weaker inflation data has led to a decline in expectations for further BoE rate hikes. Money markets now see a 38% chance of the BoE raising rates by 50 basis points at its next meeting in August. This is down from 64% before the release of the CPI data.

The decline in interest rate expectations has led to a sell-off in the pound. The pound is now trading at its lowest level against the US dollar since early June.
Given the big amount of long positioning in sterling, further downside in the currency cannot be ruled out.

Key Takeaways

  • The British pound fell sharply on Tuesday morning after the latest release of UK CPI data showed a faster than expected fall in price pressures.
  • The drop in inflation is good news for consumers, but bad for the pound.
  • The pound has been propped up recently by expectations that the Bank of Englad (BoE) will continue to raise interest rates in effort to combat inflation.

However, the weaker inflation data has led to a decline in expectations for further BoE rate hikes.

  • Money markets now see a 38% chance of the BoE raising rates by 50 bps in its next August meeting.
  • This is down from 64% before the release of the CPI data.
  • The decline in interest rate expectations has led to a sell-off in the pound.
  • The pound is now trading at its lowest level against the US dollar since early June.
  • Given the big amount of long positioning in sterling, further downside in the currency cannot be ruled out.

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