The British Pound (GBP) is trading cautiously near a three-month low of 1.2750 against the US Dollar (USD) in Wednesday’s London session. The GBP/USD pair remains under pressure as investors await the release of the US Consumer Price Index (CPI) data for October, set to be published at 13:30 GMT. Meanwhile, the US Dollar Index (DXY), which tracks the strength of the Greenback against a basket of six major currencies, maintains its gains around the 106.00 mark, the highest level seen in over six months.
Economists expect headline inflation in the US to rise to 2.6% in October, up from 2.4% in September, while core CPI—excluding volatile food and energy prices—is projected to increase by 3.3% year-on-year. Month-on-month, the headline CPI is anticipated to grow by 0.2%, with core CPI expected to rise by 0.3%.
Despite these expectations, the inflation data is not likely to cause significant shifts in market expectations regarding the Federal Reserve’s (Fed) policy stance for its December meeting, unless the results substantially deviate from forecasts. Recent comments from several Fed officials have suggested that they are confident inflation will continue to trend toward the central bank’s 2% target.
Nevertheless, Minneapolis Federal Reserve President Neel Kashkari took a more cautious approach on Tuesday, noting at a Yahoo! Finance event that any surprise upside in inflation before the December meeting could cause the Fed to reconsider its stance. “If inflation surprises to the upside before December, that might give us pause,” Kashkari said. He also noted that current monetary policy remains “modestly restrictive” and expressed confidence that economic growth will continue. When discussing the potential inflationary effects of President-elect Donald Trump’s policies, Kashkari downplayed the impact of tariffs, stating that “the tariff is a one-time increase in prices, that’s not inflationary in itself.”
Trump’s proposed policies include a 10% increase in import tariffs and cuts to corporate taxes, which are part of his broader economic agenda.
According to the CME FedWatch tool, the probability of the Fed cutting interest rates by 25 basis points to a range of 4.25%-4.50% in December stands at 62%, a slight decrease from the 70% probability recorded last week. This shift reflects some uncertainty in the market about the central bank’s next move.
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