The release of the latest consumer price index caused the Pound to go on the defensive during trading on Wednesday. Inflation moved to the highest figure for four months, reaching 1% although this is likely to be short-lived. This added pressure on the currency with the GBP / USD rate dropping to 1.3118 and the Euro rate dropping to 1.1068 according to the Foreign Exchange market. Brexit developments are likely to play a role in the movement of the Pound during the remainder of the week.
A lower revision of the final CPI reading in the Eurozone caused the Euro to drop back slightly as the Eurozone slipped into deeper deflation than originally expected. Improvements in the US Dollar also pushed the Euro down as a result of the negative correlation between EUR / USD. Again, increasing cases of coronavirus around Europe is also causing problems for investors.
The US Dollar pushed higher on Wednesday, making up for any losses it experienced at the start of the week, as investors took advantage of the currency. This move came from a lack of certainty around the impact of coronavirus on the economy according to the latest minutes from the Federal Reserve’s policy meeting.