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Pound, U.S. Futures Slip as UK and US Interest Rates Brought Into Focus

U.S. futures as well as the British pound declined as investors reflect on U.S. and U.K. interest rates and how they affect each country’s economic outlooks going forward.

S&P 500 futures fell 0.3% while those on the Nasdaq 100 declined by 0.4%. Futures on the Dow Jones Industrial Average retreated by just 0.2%. Stocks in Europe steadied, however, with the Stoxx Europe 600 edging higher by 0.1%.

The drop comes after Tuesday’s Consumer Price Index showed that prices rose more than expected. Still, the dollar strengthened, with the Bloomberg Dollar Spot Index gaining 0.4% as the greenback strengthened against its Group-of-10 peers.

In contrast, the British pound weakened against the dollar by 0.8%, putting it at $1.2076. This comes as U.K. inflation remains significantly high, five times above the Bank of England’s target. One positive sign for the U.K. economy was the significant CPI drop experienced in January.

Frederique Carrier, head of investment strategy at RBC Wealth Management, commented on the difficulty of predicting market activity going forward. “People are trying to gauge the peak for interest rates but tightening monetary policy is likely to continue, while later in the year there is the likelihood of recession that could put a downer on prices.”

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