The British pound (GBPUSD=X) experienced a decline against the dollar in early European trading on Thursday, slipping 0.2% to $1.2654.
US Inflation Data Reveals Robust Consumer Spending and Ongoing Challenges
The latest inflation data from the US indicated robust consumer spending in October, with the Personal Consumption Expenditures (PCE) Price Index rising by 2.3% year-over-year, up from 2.1% in September. The core PCE Price Index, which excludes volatile food and energy prices, increased by 2.8%, slightly surpassing the previous month’s 2.7% rise.
US Economy Shows Continued Strength
The US economy demonstrated continued strength, with third-quarter gross domestic product (GDP) growing at the expected annualized rate of 2.8%. Despite this growth, the Federal Reserve remains on high alert due to ongoing challenges in reducing inflation.
Potential Opportunity for Pound Recovery
Despite the dollar’s strength, there could be some opportunity for the pound to recover in the near term, as US markets are expected to experience lighter trading volumes ahead of Thursday’s Thanksgiving holiday and shortened session on Friday. The pound-dollar exchange rate is down 6% from its October highs after markets cut expectations for Federal Reserve rate cuts following data that showed the US economy was showing signs of fresh strength.
Pound Pushes Higher Against Euro
Meanwhile, the pound pushed higher against the euro (GBPEUR=X), trading at €1.2007.
Gold Prices Fall as Investors Digest Economic Data
Gold prices fell on Thursday as investors digested a slew of economic data pointing to persistent US inflation, which could lead the Federal Reserve to take a more cautious approach to further interest rate cuts. Spot gold declined 0.3%, trading at $2,638.27 per ounce, while US gold futures dropped 0.1% to $2,661.30 at the time of writing.
Fed’s Potential Rate Cuts in Focus
The focus in the market has shifted to the Fed’s potential rate cuts, with the latest core PCE data indicating a slowdown in inflation. This has led to speculation that the Fed’s monetary policy next year may be less dovish than previously expected, according to Kelvin Wong, senior market analyst for Asia Pacific at OANDA.
Central Bank’s Struggle to Bring Inflation Back to Target
The central bank’s ongoing struggle to bring inflation back to its 2% target, coupled with the possibility of higher tariffs under Donald Trump’s administration, could further limit the Fed’s capacity to implement rate cuts in 2024. Markets are currently pricing in a 68.2% chance of a quarter-point rate cut in December, according to the CME Group’s FedWatch tool.
Investor Sentiment Remains Wary
Investor sentiment remains wary, with concerns that president-elect Trump’s proposed tariff measures could weigh on the global economic outlook. Additionally, the ongoing Russia-Ukraine conflict continues to add uncertainty to the market.
Oil Prices Dip as Investors Process Surprise Increase in US Gasoline Inventories
Oil prices dipped on Thursday as investors processed a surprise increase in US gasoline inventories from the previous session. Brent crude futures lost 0.3%, trading at $72.62 per barrel, while US West Texas Intermediate (WTI) slipped 0.5% to $68.35 per barrel at the time of writing.
US Energy Information Administration Reports Surprise Increase in Gasoline Stocks
The US Energy Information Administration (EIA) reported that gasoline stocks rose by 3.3 million barrels to 212.2 million barrels in the week ending 24 November, defying analysts’ expectations in a Reuters poll, which had forecast a draw of 46,000 barrels.
Oil Traders Eye Sunday’s OPEC+ Meeting
Meanwhile, oil traders are eyeing Sunday’s OPEC+ meeting, where the group is expected to announce an extension of its production cuts. However, many analysts believe this is already priced into the market, so any price movement after the meeting is likely to be minimal.
Broader Market Movements
In broader market movements, the FTSE 100 (^FTSE) opened higher, gaining 0.2% to 8,289.21 points. For more details, check our live coverage here.