The British pound weakened against the U.S. dollar on Friday following the release of U.S. inflation data on Thursday. The sterling lost 0.3% and stood at $1.217, thereby erasing its 0.2% rise during the European session. The currently advanced 0.5% the previous day.
Data released on Thursday indicated that U.S. consumer price index (CPI) inflation cooled for the sixth consecutive month. This trend gives rise to investor hopes that the Federal Reserve will lower its interest rate hikes.
Having lost 22% over the course of 2022, the pound has strengthened against the dollar since hitting a record low of $1.0327 in September. As of Friday, the currency remains on course for its fourth consecutive monthly increase.
The pound remains weaker against the euro when looked at historically, having fallen more than 0.2% in January so far. The sterling experienced a more dramatic 2.5% drop against the euro in December.
Parisha Saimbi, an FX strategist at French bank BNP Paribas, expects the euro to continue strengthening against the sterling over the coming months. “Trading above that 89/90 type level is generally reflective of greater economic stress or downbeat sentiment in the UK,” she explained.