The pound sterling reportedly strengthened against the US dollar on Thursday after data showed British borrowers increased loan demand and business services were stronger than feared in Britain. Meanwhile, the euro currency strengthened after inflation data in France and other European countries was released.
The pound sterling strengthened after net lending data showed British borrowers increased loan demand, in a sign that households were generally able to cope with high interest rates. Net borrowing by British users was the highest in almost seven years in November. A separate business study, the UK Service Purchase Index (PM), showed British service companies expanded more strongly in December than expected and market optimism reached a seven-month high.
Traders expect around 140 currency rate reductions by 2024. Rabobank expects the BoE to maintain the benefit rate at current levels until the second half of this year.
The pound sterling ultimately rose 0.14% versus the dollar at $1.2668. GBP rose as much as 0.5% to $1.2728 after the data was released and after falling as much as 0.87% on Tuesday to a three-week low. The euro on the other hand also bounced back because the market expected an increase in headline inflation in the European zone. This can indirectly support higher ECB rates for a longer period.
French consumer prices increased in December according to expectations, preliminary data from the national statistics agency showed on Thursday, due to increases in energy and service prices over the year. In Germany, CPI inflation rose to 3.7% in December, as expected, from 3.2% the previous month.
The euro rose as much as 0.26% to $1.0951, after falling to a more than two-week low on Wednesday. The US dollar, which measures the US dollar against six major currencies, fell 0.07% to 102.33, after hitting a three-week peak of 102.73 on Wednesday, with the Federal Reserve's last-minute meeting giving some hints that the United States might start reducing the yield.
December policy minutes released on Wednesday showed there was no clear indication of when the Fed would begin rate cuts, with policy makers still watching data developments.
Recent data shows the US economy continues to slowly support the Fed's rate cut forecast this year if inflation remains below control, although traders remain divided on the rate cut and the scale of cuts from the central bank.
