The US dollar steadied against a basket of currencies on Wednesday, pausing after a three-day rally, while the British pound weakened following data showing that UK inflation for September came in weaker than expected.

The Japanese yen rose slightly against the dollar after touching a one-week low on Tuesday, as Reuters reported that newly appointed Prime Minister Sanai Takaiichi is preparing to unveil an economic stimulus package expected to exceed last year’s ¥13.9 trillion ($92.19 billion) plan, aimed at helping households cope with inflation.

After sharp declines, gold stabilized at $4,119.80 per ounce following its biggest one-day drop in five years during the previous session.

British Pound Falls as Inflation Slows Below Expectations

The pound was the weakest among major currencies on Wednesday after data showed UK inflation unexpectedly held steady at 3.8%, missing forecasts from both economists and the Bank of England.

The pound fell 0.4% against the dollar to $1.3318 and 0.3% against the euro to 87.04 pence.

Francesco Pesole, currency strategist at ING, said, “When the Bank of England started sending hawkish signals recently, it was based on the view that inflation would be stronger than economists expected — but that doesn’t seem to be the case now.”

He added that the latest data opens the door for a possible rate cut in December, though not in November since that would be “too early before the budget announcement.”

Market pricing now shows about a 75% probability of a rate cut by the Bank of England before year-end.

Focus Turns to the Japanese Yen

The dollar slipped 0.1% to ¥151.85 in late trading.

The yen has lost roughly 2.5% this month amid Takaiichi’s campaign for prime minister — its biggest monthly drop against the dollar since July — as investors anticipate that her expansionary fiscal stance and uneasy relationship with the Bank of Japan could weigh on the currency.

Pesole of ING noted, “Takaiichi’s first remarks as prime minister suggest she wants to calm markets and avoid worsening yen weakness for now.”

Known for her support of loose fiscal and monetary policies, Takaiichi said Tuesday that monetary policy decisions remain the prerogative of the Bank of Japan.

Meanwhile, newly appointed Finance Minister Satsuki Katayama said Wednesday that economic and monetary policy coordination between the government and the BOJ is essential to ensure effectiveness.

The Bank of Japan is set to announce its next policy decision on October 30, with futures markets pricing a 20% chance of a 25-basis-point rate hike to 0.75%.

Dollar Steadies

The dollar index, which tracks the greenback against six major peers, was flat at 99.01 after three consecutive days of gains.

This came after President Donald Trump on Tuesday rejected a request from senior Democratic lawmakers to meet before the end of the ongoing three-week US government shutdown.

According to prediction platform Polymarket, hopes for a quick resolution to the shutdown are fading, with current odds showing a 40% chance it will last until November 16 or later.

The political standoff complicates the Federal Reserve’s task ahead of its October 29 meeting, though markets still expect a 25-basis-point rate cut next week followed by another in December, according to a Reuters poll of economists who remain deeply divided over the path of rates through next year.

CME FedWatch data shows a 97.3% probability of a quarter-point cut, down slightly from 99.4% the previous day.

The euro was steady at $1.1597 after a planned summit between Trump and Russian President Vladimir Putin was postponed, following Moscow’s refusal to agree to an immediate ceasefire in Ukraine.

Silver prices fell across European markets on Wednesday, deepening losses for a second consecutive session and hitting a two-week low after dropping below the $50-per-ounce mark, as selling pressure continued to dominate the precious-metals market.

The US dollar extended its gains against a basket of global currencies, supported by improved risk appetite in financial markets amid rising optimism about trade conditions following recent comments from US President Donald Trump and Indian media reports that boosted investor confidence in the global economic outlook.

Price Overview

• Today’s silver prices: Spot silver fell 2.4% to $47.55 — the lowest since October 7 — down from the opening level of $48.71, after touching a high of $49.31.

• On Tuesday, silver lost more than 7%, its second decline in three sessions and the biggest one-day drop since April 4, as rapid profit-taking followed record highs at $54.48 per ounce.

US Dollar

The dollar index rose 0.15% on Wednesday, extending gains for a fourth straight session to a one-week high of 99.10, reflecting continued strength in the greenback against major and minor peers.

This advance came as investors continued to favor the US dollar as the most attractive asset for now, especially amid growing expectations that several major central banks — in the UK, Japan, Canada, and Australia — will adopt more accommodative monetary policies to support slowing economies.

Trade Optimism

US President Donald Trump said he expects to reach a “fair trade deal” with Chinese President Xi Jinping when they meet next week in South Korea and downplayed the risk of confrontation over Taiwan.

India’s Mint newspaper reported that New Delhi and Washington are close to finalizing a long-awaited trade agreement that would cut US tariffs on Indian imports from 50% to 15%.

Gold prices fell sharply across European markets on Wednesday, extending heavy losses for a second straight day and hitting a two-week low, nearing a drop below the psychological $4,000-per-ounce level amid accelerating profit-taking and rising optimism over global trade, which reduced demand for safe-haven assets.

Prices also came under pressure from continued strength in the US dollar against a basket of major currencies, as investors focused on buying the greenback as the best available investment in the foreign-exchange market.

Price Overview

• Today’s gold prices: Spot gold fell 2.9% to $4,004.56 — the lowest since October 10 — down from the opening level of $4,124.91, after hitting a session high of $4,161.19.

• On Tuesday, gold lost 5.3%, its biggest daily drop since August 2020, as rapid profit-taking followed a record high of $4,381.73 per ounce.

Trade Optimism

US President Donald Trump said he expects to reach a “fair trade deal” with Chinese President Xi Jinping when they meet next week in South Korea and downplayed the risk of confrontation over Taiwan.

India’s Mint newspaper reported that New Delhi and Washington are close to finalizing a long-awaited trade agreement that would lower US tariffs on Indian imports from 50% to 15%.

US Dollar

The dollar index rose 0.1% on Wednesday, marking its fourth straight session of gains and reaching a one-week high of 99.06, reflecting continued strength in the US currency against major and minor peers.

The dollar’s advance came as investors concentrated on buying the greenback as the most attractive asset for now, especially as several major central banks — in the UK, Japan, Canada, and Australia — are expected to adopt more accommodative monetary policies to support slowing economies.

Outlook for Gold

• Matt Simpson, senior analyst at StoneX, said: “Easing trade tensions between the US and China was the small spark that triggered gold’s collapse after a strong rally.”

• Simpson added: “What we’re seeing now is simply a technical repositioning in a market that clearly needed a correction after its prolonged move above $4,000. I believe the worst of the daily volatility is likely behind us, and any new pullbacks in prices will probably be seen as buying opportunities.”

SPDR Fund

Holdings in SPDR Gold Trust — the world’s largest gold-backed exchange-traded fund — were unchanged on Tuesday, with total holdings steady at 1,058.66 metric tons, the highest since June 24, 2022.

The British pound rose slightly in European trading on Friday against a basket of global currencies, heading toward its first gain in four sessions against the US dollar, supported by a pause in the greenback’s recent rally in the foreign exchange market.

Following upbeat economic data from the United Kingdom, doubts increased about the likelihood of a Bank of England rate cut in November. To reassess these expectations, investors are awaiting key inflation data due later today.

Price Overview

• Today’s pound exchange rate: The pound rose 0.1% to $1.3380 from the opening level of $1.3371, after hitting a low of $1.3364.

• On Tuesday, the pound fell 0.3% against the dollar, marking its third straight daily loss, as investors favored the US dollar as the best alternative investment.

US Dollar

The dollar index fell 0.1% on Wednesday, retreating from a one-week high and heading for its first loss in four sessions, reflecting a pause in the US currency’s advance against a basket of global peers.

This pullback came amid expectations that the US government shutdown could continue into November, after President Donald Trump rejected a request from senior Democratic lawmakers on Tuesday to meet before the end of the ongoing three-week shutdown.

UK Interest Rates

• Recent data from London showed that average wages in the UK rose at the fastest pace in three months in August, while the British economy grew better than expected during the same period.

• As a result, market pricing for a 25-basis-point rate cut by the Bank of England at its November meeting dropped below 50%.

UK Inflation Data

To reprice current rate expectations, investors are awaiting key UK inflation figures for September, which are expected to have a strong impact on the Bank of England’s monetary policy outlook.

At 07:00 GMT, the overall Consumer Price Index (CPI) is expected to rise 4.0% year-on-year in September, up from 3.9% in August, while the core CPI is forecast to rise 3.7% year-on-year, up from 3.6% the previous month.

Outlook for the British Pound

According to our estimates here at Economies.com, if UK inflation data come in above market expectations, the likelihood of a Bank of England rate cut before year-end will decrease — potentially leading to further gains for the pound against a basket of major currencies.