The British pound fell against the U.S. dollar on Tuesday as the latter rebounded following stronger-than-anticipated U.S. consumer price data, tempering expectations for imminent Federal Reserve rate cuts.
The pound was last down 0.3% at $1.2720, extending declines from the previous session after the U.S. Bureau of Labor Statistics reported a rise in the core CPI to 3.8% year-over-year in March, above forecasts of 3.7%. The headline CPI also increased 0.4% month-over-month, matching expectations but reinforcing concerns over persistent inflationary pressures in the world’s largest economy.
The dollar index, which measures the greenback against a basket of six major peers, climbed 0.2% to 104.60, reversing earlier losses as traders reassessed the likelihood of a June rate cut by the Federal Reserve. Fed funds futures now imply a roughly 60% probability of a rate reduction at the central bank’s next policy meeting, down from about 70% prior to the data release.
Sterling’s decline mirrored broader weakness in the G10 currency complex, with the euro also retreating 0.2% to $1.0840. Analysts at ING noted that the pound’s vulnerability reflected both the dollar’s renewed strength and ongoing uncertainty around the Bank of England’s policy path, particularly after mixed signals from recent U.K. economic data.
"The market is still grappling with the BoE’s stance, which appears more cautious than the Fed’s," said a strategist at a major European bank. "Until there’s clearer evidence of disinflation in the U.K., the pound may struggle to sustain gains."
The drop in sterling comes ahead of key U.K. data releases later this week, including March retail sales figures and the latest jobs report, which could further influence BoE policy expectations.
