The Pound is stable against the US Dollar after this morning’s release of higher than expected UK inflation data. Sterling weakened against the Euro, as the markets processed the news that inflation is now 2.7%, and the Bank of England isn’t likely to raise interest rates.

The US Dollar to Euro exchange rate is at its lowest level since President Trump was elected in November, after political turmoil threatens to stall an interest rate hike that was expected in June. A disappointing manufacturing data release is another reason the Federal Reserve might not raise US interest rates. There’s also concern that Trump won’t be in office long enough to push through his tax reform after he allegedly leaked classified information to Russian officials.

Pound Sterling – UK Markets

On Tuesday, Sterling fell by 0.6% against the Euro setting the rate at €1.16. On the contrary, the British Pound remained stable against the US Dollar. Sterling to US Dollar exchange rate is at $1.28.

Britain’s inflation rate jumped to 2.7% in April, higher than the expected 2.6%. Analysts suggest that Easter played a role in this increase. The Office for National Statistics (ONS) said that Easter air fares were the main contributors to the increase, followed by rising prices of clothing and electricity. The rise of the inflation rate means that real wages are decreasing since earnings only rose by 2.3% during the first three months of the year.

ING economists released a report in which they suggest that, despite the higher than expected UK inflation rate, the Bank of England (BoE) won’t raise interest rates until 2019 because of the household spending squeeze and increased Brexit uncertainty.

US Dollar – US Markets

The US Dollar slumped against the Euro, losing 0.6% in value. The exchange rate was set at €0.90. The US Dollar traded near a one-week low against a basket of US trade partners’ currencies, commonly known as the US Dollar Index (DXY).

The reason for the US Dollar’s fall was the data coming from a US manufacturing report. The New York Federal Reserve announced that its barometer on business activity in New York State unexpectedly fell in May, being in a negative territory for the first time in the last 7 months. J. P. Morgan said that it expected a “cooling” in the manufacturing sector, but it appears that the slowdown may be more severe than expected.

President Donald Trump helped the US Dollar fall when it was revealed that he shared classified information with the Russian foreign minister, Sergey Lavrov, and the Russian ambassador to the US, during an Oval Office meeting last week. The White House declared the allegations, first reported by the Washington Post, as incorrect.

Euro – European Markets

The Euro continues to rise against the US Dollar reaching to $1.10 on today’s markets. The strengthening of the single market currency is due to the positive news of the Eurozone’s improved economy, as the US comes to grips with Trump’s firing of the FBI director James Comey and the disappointing results of the US retail sales.

On Friday, the German Statistics Office announced the latest economic numbers for the country, where growth increased by 0.6% for the first quarter of the year. Today, Italy released its GDP numbers, reporting a growth of 0.2%. The Eurozone GDP also rose by 0.5% in April.

However, according to George Saravelos, the co-head of Deutsche Bank’s forex research, the Euro’s momentum won’t last due to predictions that the US Federal Reserve might raise interest rates in June. He expects the single currency to stay stable between $1.09 - $1.10 in the next few months.

Other Currencies – Highlights

Sterling keeps strengthening against the Swiss Franc, bouncing back to levels from two weeks ago. On today’s markets the Pound is trading at 1.28 CHF. The Swiss currency is dropping also against the Euro. According to some analysts, that tendency will continue with “both the EUR and the GBP finally moving upward versus the CHF.” That is due to the stable political situations from both sides of the La Manche and “a general turnaround in the economy of both the EU and Great Britain”.

The New Zealand Dollar weakened against the Pound and the US Dollar despite the increasing prices on commodity markets. Sterling is trading at 1.88 NZD, a tad higher than yesterday’s 1.87 NZD. However, some experts believe that the increase of commodity prices, on which the Kiwi depends, will bounce the currency back.