Daily digest market movers: Pound Sterling consolidates while US Dollar hovers near four-month high
- The Pound Sterling seems vulnerable near more than six-week low around 1.2540 due to multiple headwinds. Slowing United Kingdom inflation and dismal market mood have weighed heavily on the Pound Sterling.
- The British Retail Consortium (BRC) reported on Tuesday that the UK’s shop price inflation grew 1.3% in March, its slowest pace in more than two years. This marks a deceleration from the 2.5% increase seen in February. Shop price inflation fell due to softer prices of both food and non-food items. Non-food prices rose meagrely by 0.2% from the 1.3% rise seen a month earlier, while food prices grew by 3.7%, down from 5.0%.
- BRC Chief Executive Helen Dickinson said fierce competition among retailers to bring prices down for their customers has eased shop price inflation to its lowest since December 2021. However, she warned that increasing cost pressures could put the progress in bringing down inflation at risk.
- Lower shop price inflation could be a relief for Bank of England policymakers, providing them with ground for reducing interest rates after keeping them at high levels for more than two years. Currently, the market expects that the BoE will begin reducing interest rates from the June meeting.
- Going forward, investors await the S&P Global/CIPS Manufacturing PMI final data for March, which will be published on Tuesday. The factory data is forecasted to have remained unchanged from its preliminary reading of 49.9, which came in marginally below the 50.0 threshold that separates expansion from contraction.
- Meanwhile, market sentiment has turned downbeat as traders have pared expectations for the Federal Reserve to cut interest rates in June. The prospects for a Fed rate cut that month eased after the United States Institute of Supply Management (ISM) reported stronger-than-expected Manufacturing PMI data for March. The Manufacturing PMI landed above the 50.0 threshold for the first time after 16 straight months of contraction. The US factory sector seems to be recovering from the high interest rate environment, which has weighed on activity for the last year and a half.
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