Pound climbs as hopes of September rate cut ‘extinguished’ by inflation reading

Pound (GBPUSD=X, GBPEUR=X)

The pound moved higher on Wednesday morning after stronger-than-expected inflation effectively ruled out the chances of a September interest rate cut.

CCY - Delayed Quote•USD

(GBPUSD=X)

Follow View Quote Details

1.3495

+0.0005

+(0.04%)

As of 9:42:22 AM GMT+1. Market Open. GBPUSD=XGBPEUR=X

Advanced Chart

Sterling was higher against the dollar, up 0.1% at $1.3495, and by the same margin against the euro at €1.1589.

Consumer Prices Index (CPI) inflation increased to 3.8% in July from 3.6% in June, the Office for National Statistics (ONS) said. Most economists had been forecasting a rise to 3.7%.

Suren Thiru, economics director at ICAEW, said: “July’s outturn probably extinguishes hope of a September interest rate cut, while strengthening underlying inflationary pressures call into question whether policymakers will be able to relax policy again this year.”

Read more: UK inflation rises to 18-month high in July, driven by higher air fares

Financial markets see a less than 5% chance of a reduction in borrowing costs after the inflation data..

The US dollar index (DX-Y.NYB), which measures the greenback against a basket of six currencies, was muted 0.2% to 98.28 on Tuesday.

Gold (GC=F)

Gold prices edged higher in early European trading but remained near a three-week low as improved risk sentiment weighed on the safe-haven metal, with investors awaiting the Federal Reserve’s Jackson Hole symposium for policy clues.

COMEX - Delayed Quote•USD

(GC=F)

Follow View Quote Details

3,364.30

+5.60

+(0.17%)

As of 4:32:37 AM EDT. Market Open. Advanced Chart

At the time of writing, gold futures were up 0.2% to $3,366.20 per ounce, while spot gold had gained 0.1% to $3,327.16 per ounce.

“Gold is facing pressure from a firm dollar and improving risk appetite on the back of recent geopolitical developments,” said Kelvin Wong, senior market analyst at Oanda.

“Markets are now focused on Fed chair Jerome Powell’s speech in Jackson Hole.”

Read more: FTSE 100 LIVE: Stocks slip as UK inflation jumps to highest level since January last year

Powell is due to speak on Friday at the gathering hosted by the Kansas City Federal Reserve. Traders are hoping for greater clarity on the future path of interest rates, with futures markets currently pricing in two 25 basis-point cuts before the end of the year, the first of which is widely anticipated in September.

Gold tends to perform better in a lower interest rate environment and during periods of heightened geopolitical tension, as it becomes more attractive relative to yield-bearing assets.

Oil (BZ=F, CL=F)

Oil prices rose on Wednesday morning as traders assessed the uncertain trajectory of diplomatic talks aimed at ending the war in Ukraine, with sanctions on Russian crude still firmly in place and the possibility of further restrictions on buyers of its exports yet to be ruled out.

Story continues

NY Mercantile - Delayed Quote•USD

(BZ=F)

Follow View Quote Details

66.04

+0.74

+(1.13%)

As of 4:32:39 AM EDT. Market Open. BZ=FCL=F

Advanced Chart

Brent (BZ=F) crude futures gained 0.8% to trade at $66.32 per barrel at the time of writing, while West Texas Intermediate (CL=F) futures climbed by 1% to $62.36 a barrel.

Despite comments from US president Donald Trump suggesting the United States might offer air support as part of security guarantees for Ukraine, he acknowledged that Russian president Vladimir Putin "might not want to make a deal," casting doubt over the prospects of a swift resolution.

"Crude markets are in limbo ... continued protracted peace talks will keep the market on its toes," said Emril Jamil, a senior analyst at LSEG.

Trump said on Monday he was arranging a meeting between Putin and Ukrainian president Volodymyr Zelensky to be followed by a trilateral summit between the three presidents.

Stocks: Create your watchlist and portfolio

In equities, the FTSE 100 (^FTSE) slipped on Wednesday morning, down 0.1% to 9,179 points. For more details, on market movements check our live coverage here.

Download the Yahoo Finance app, available for Apple andAndroid.