UK inflation has peaked, but the latest data is a tad hawkish for the Bank of England. Food inflation was strong, which is red meat for the hawks. Services inflation rose, once volatile items are stripped out. However, we still expect the Bank to cut rates in December
The Bank looks likely to keep rates on hold on 6 November, despite better inflation and wage news. The committee is deeply divided, and we don't expect clear signals on the Bank's next steps. But assuming the Autumn Budget goes as expected, a December rate cut now looks more likely than not
The euro’s outlook remains tied to developments on US tariffs and on Ukraine peace talks. EUR/USD took a hit late Friday after the Trump-Zelenskyy incident, but has rebounded since trading resumed on Sunday evening – perhaps on the news that Ukraine remains open to a mineral deal with the US and that the EU is actively trying to bring the US back to the negotiating table with Ukraine.
