The data released by the UK Office for National Statistics shows that the CPI in September increased by 1.7% year-on-year, a significant decline from the previous value of 2.2%, lower than the economists' expected 1.9%, and also below the Bank of England's previous expectation of 2.1%. This inflation rate has reached the lowest level since April 2021 and has fallen below the Bank of England's 2% target level for the first time. The reasons for the slowdown in inflation include a significant drop in air ticket and gasoline prices, as well as a noticeable slowdown in service industry inflation. The service industry inflation rate in the UK for September was 4.9%, lower than the expected 5.2%. Financial journalist David Goodman stated that the significant decrease in the service industry inflation rate is surprising. According to his estimates, this is the largest decline since 2020, and if not considering the pandemic period, it is the largest decline since 2017. With the significant cooling of inflation, traders have increased their bets on the Bank of England cutting interest rates within the year, expecting the bank to cut rates by another 42 basis points by the end of the year, higher than the previous 35 basis points. Traders anticipate that the Bank of England will cut rates by 24 basis points in November, higher than the previous 21 basis points.
Additionally, statistical data released by the UK Office for National Statistics on the 16th showed that in September, the UK's Consumer Price Index (CPI) slowed down to 1.7% year-on-year, lower than the market's expectation of 1.9% and also below the Bank of England's previous expectation. This is the first time in recent years that this data has been below the Bank of England's established 2% inflation target. The Consumer Price Index (CPI) for August was 2.2% year-on-year. At the same time, in September, both core inflation and service inflation pressures in the UK showed a decline. The UK's core inflation index for September was 3.2% year-on-year, lower than the 3.6% level in August; the service inflation level also decreased from 5.6% in August to 4.9%. For the Bank of England, the decline in core inflation and service inflation in September, coupled with the recent labor market data showing a slowdown in wage increases, is very welcome news. Currently, UK market institutions have significantly raised their expectations for the Bank of England to cut interest rates again in November.
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Data to watch today includes the Eurozone's September Harmonized CPI year-on-year rate, the US October Philadelphia Fed Manufacturing Index, the US September retail sales month-on-month rate, the number of initial jobless claims in the US as of October 12, and the US September industrial output month-on-month rate. In addition, the European Central Bank will announce its interest rate decision in the evening, which requires close attention.
US Dollar Index
The US Dollar Index fluctuated higher yesterday, reaching an 11-week high, and is currently trading near 103.50. The main reason supporting the climb of the US Dollar Index is the continued cooling of expectations for the Federal Reserve to continue aggressive interest rate cuts. In addition, the safe-haven sentiment triggered by geopolitical tensions also provides some support for the safe-haven US dollar. Today, attention is focused on the pressure near 104.00, with support near 103.00.
Euro/US Dollar
The Euro fluctuated lower yesterday, reaching an 11-week low, and is currently trading near 1.0860. In addition to the US Dollar Index's continued rebound supported by factors such as the continued cooling of expectations for the Federal Reserve to continue aggressive interest rate cuts, which is the main reason for the Euro's softening, investors' expectations for the European Central Bank's interest rate cut this week also continue to exert some pressure on the exchange rate. Today, attention is focused on the pressure near 1.0950, with support near 1.0750.
Pound/US Dollar
The Pound fluctuated lower yesterday, breaking through the 1.3000 mark and reaching an 8-week low, and is currently trading near 1.2990. In addition to the technical selling near the 1.3100 mark exerting some pressure on the exchange rate, the continued climb of the US Dollar Index supported by factors such as the cooling of expectations for the Federal Reserve to continue aggressive interest rate cuts is also an important factor in the Pound's softening. Furthermore, the weak CPI data announced by the UK during the period also exerted some pressure on the exchange rate. Today, attention is focused on the pressure near 1.3100, with support near 1.2900.
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