Pound US dollar exchange rates lifted by weak US inflation reading

The pound stormed higher against the US dollar on Thursday as the ‘greenback’ was undermined by a stronger-than-expected pullback in domestic inflation last month.

Sterling is back on the defensive this morning however, with GBP/EUR muted at €1.1205, GBP/USD stalled at $1.3118 and GBP/CAD flat at C$1.7046, while GBP/AUD and GBP/NZD are both beginning to edge lower, striking AU$1.8197 and NZ$1.9897 respectively.

Looking ahead, the US dollar could face further losses this afternoon as economists forecast the latest US retail sales data will reveal a dip in US sales growth last month.

What’s been happening?                            
                          
The pound held in a narrow range against the majority of its peers yesterday, with the currency able to retain most of its recent gains following an uneventful policy meeting from the Bank of England (BoE).

Having only just raised borrowing rates in August and in light of ongoing Brexit uncertainty, the BoE offered few surprises on Thursday as it left interest rates on hold at 0.75%.

Economists speculate the bank is in no rush to change its current stance anytime soon, with suggestions that another hike won’t be on the cards until at least May next year.

At the same time the European Central Bank (ECB) offered little to excite investors yesterday as it also voted to leave rates unchanged this month, leaving the GBP/EUR exchange rate to finish the European trading session almost unmoved from the day’s opening levels.

Meanwhile the GBP/USD exchange rate bucked the trend on Thursday as the pairing broke through to $1.31, striking its highest levels since the start of August.

This came in the wake of the latest US CPI reading as US inflation was shown to have fallen from a 10-year high in August, raising some concerns that a reversal in recent US price growth could undermine potential rate hikes from the Federal Reserve in 2019.

What’s coming up?

A speech by Mark Carney could help to spark movement in the pound later today, with GBP exchange rates potentially strengthening if the recent progress towards a Brexit deal prompts a more optimistic outlook from the BoE Governor.

Meanwhile the euro may look to move higher this morning, with economists forecasting the Eurozone’s latest earnings data may show that wage growth across the Eurozone ticked higher in the second quarter.

Finally the US could cap off a subdued session this week with further losses if US retail sales growth is shown to have fallen in August, as expected.