Foreign Exchange Market Update

November 20, 2024

United Kingdom (U.K.): Inflation Accelerates More Than Forecast

British Pound traded at 1.2635 against USD at 9:00 am PST.

U.K. CPI accelerated more than expected in October, lowering the chances of a rate cut at the upcoming monetary policy meeting in December. The CPI rose 2.3% yearly, following September's 1.7% increase, which was the lowest since April 2021, the Office for National Statistics reported Wednesday. Again, the rate exceeded the Bank of England's 2% target and remained above economists' forecast of 2.2%. Core inflation which strips out prices of energy, food, alcohol, and tobacco, edged up unexpectedly to 3.3% from 3.2% in September. The core rate was seen at 3.1%.

At the November meeting, the Bank of England reduced its benchmark rate for the second time this year citing continued progress in disinflation. However, it suggested that further easing is set to be gradual due to the upward impact on inflation from the Autumn budget. The bank had lowered the Bank Rate by a quarter-point to 4.75% this month and the BoE had projected headline CPI inflation to rise to 2.5% by December. Moreover, the next monetary policy announcement is due on December 19. Policymakers are more cautious about further easing as inflation moves above the target.

Driven by higher electricity and gas prices, housing and household services provided the largest upward contribution to the annual inflation in October, the ONS said. Meanwhile, the biggest offsetting downward contribution came from recreation and culture. The annual decline in goods prices slowed to 0.3% from 1.4%, while services inflation rose to 5.0% from 4.9%. The monthly CPI climbed by 0.6% after remaining unchanged in September. 11/20/2024 - 03:00:00 (RTTNews)

Germany: Producer Prices Continue to Fall in October

Germany's producer prices declined further in October, slightly slower compared to September, data from Destatis showed. Producer prices dropped 1.1% yearly, following a 1.4% fall in the prior month. Thus, prices have been falling since July 2023. The annual decline was again driven by the fall in energy prices.

Meanwhile, capital, consumer, and intermediate goods were more expensive. Energy prices dropped 5.6% annually in October amid a 12.9% slump for mineral oil products. Prices for capital goods increased 2.0%, and those of consumer goods climbed 1.9%. Durable consumer goods were 0.9% more expensive than a year ago. Data showed that intermediate goods prices grew only 0.4%. Excluding energy, producer prices gained 1.3% on the year but remained flat from a month ago. MoM, producer prices rebounded 0.2% after falling 0.5% in September. 11/20/2024 - 02:39:00 (RTTNews)