Data from the US Labour Department revealed the cost of services was offset by the largest drop in the price of goods in seven months. Year-on-year, US producer prices rose by 1.8 percent despite forecasts suggesting inflation would be left unchanged from July’s gain of 1.7 percent. However, this afternoon’s data is unlikely to have much effect on market expectations for a September rate cut from the Federal Reserve.
Meanwhile, President Donald Trump has called on the Fed to push interest rates into negative territory.
The US President, who has a history of pushing for lower interest rates, blasted Fed Chairman Jerome Powell for not slashing rates quickly and dramatically enough.
Earlier this morning, the pound steadied against the US dollar as markets priced in the implications of Prime Minister Boris Johnson taking the UK out of the EU with a deal on October 31.
A defiant Mr Johnson stated he would not request an extension to Article 50 just hours after the Brexit delay bill became law.
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Sterling was hit by further Brexit uncertainty today as Scottish judges ruled the proroguing of parliament “null and of no effect”, a verdict which has now been deferred to the Supreme Court which will hold a three day hearing next week.
Opposition MPs are now calling for parliament to be recalled but remain at loggerheads with an unyielding Tory government refusing to accede.
Meanwhile, the upcoming European Central Bank policy decision is likely to set the tone for next week’s Federal Reserve meeting, with any interest rate cut potentially squeezing the US dollar.
Looking ahead to Thursday, the dollar could slide against Sterling if US inflation figures fail to rise as high as forecast.
This would add to the case for a Fed cut as policymakers previously cited weak inflation as the main cause for July’s cut.