Hot, Sticky US Inflation Print Prompts Pound, Euro Slide Against Dollar
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The US Dollar rallied strongly on Tuesday, buoyed by unexpectedly robust US inflation data, leading markets to dismiss the possibility of a March rate cut. The Euro to Dollar (EUR/USD) exchange rate slumped to 1.0725 from highs fractionally below the 1.0800 level while the Pound to Dollar (GBP/USD) exchange rate dipped sharply to just below 1.2600 from 1.2690 highs posted after the UK jobs data. US consumer prices increased 0.3% for January compared with consensus forecasts of a 0.2% increase. The headline annual inflation rate declined to 3.1% from 3.4%, but above market expectations of 2.9% and failing to dip below the 3.0% level. Core prices increased 0.4% on the month compared with consensus forecasts of 0.3% and the year-on-year rate held at 3.9% compared with expectations of a decline to 3.7%. Following the data, markets priced out any chance of a March rate cut and the chances of a May cut dipped sharply to near 40% from 60% ahead of the data.
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