Pound Records Biggest Drop in a Month as UK Inflation Misses Forecasts

Deep News12-17

The British pound posted its largest single-day decline in a month after UK inflation data came in weaker than expected, fueling bets that the Bank of England may need to cut interest rates further next year.

Sterling fell more than 0.8% against the dollar to 1.3312, hitting a one-week low, while the yield on UK 10-year government bonds dropped over 7 basis points to 4.45%. Money markets increased expectations for BOE rate cuts, pricing in 67 basis points of reductions by the end of next year, up from 58 basis points before the inflation report.

According to forex traders familiar with the transactions, hedge funds sold the pound against both the euro and the dollar in the spot market following the data release. The traders requested anonymity as they were not authorized to discuss the matter publicly.

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