Sterling Closes at 1.33462 Dollars as U.S. Inflation Exceeds Expectations

Key Facts

The pound closed at 1.33462 dollars on November 10, down from 1.34405 dollars in the previous session, as U.S. inflation data that exceeded expectations fueled bets on monetary tightening. Reuters said the pound fell 0.3% to 1.3395 dollars in Tuesday trading, after rising about 0.7% in the previous session. The report linked pressure on the currency to hawkish remarks by Federal Reserve Governor Christopher Waller and U.S. price data. On the same day, Waller said inflation remained elevated and further tightening would be necessary, "sooner rather than later," to put it on a path toward the 2% target over the medium term. The combination of data and remarks refocused markets on the divergence between monetary policy paths in the United States and Britain.

The U.S. consumer price index rose 0.4% in October from a month earlier, after a 0.6% increase in September, exceeding the 0.3% forecast in a Reuters poll. The core index, which excludes food and energy, also rose 0.3% in October, the same monthly increase recorded in September and August. Economists had expected the core index to rise 0.2% in October. The reading highlights that underlying price pressures had not slowed from their pace in the previous two months, while the headline index came in above analysts' expectations. The Bureau of Labor Statistics did not publish the annual inflation rate for October, because the federal government shutdown in October 2025 prevented the collection of price data for that month, leaving no year-earlier comparison available.

By component, the shelter index rose 0.3% in October and accounted for more than 30% of the monthly increase in the headline index, according to the Bureau of Labor Statistics. The food index also rose 0.5% and energy 0.7% during the month. This put shelter at the forefront of the factors the bureau cited for the index's increase, alongside higher food and energy prices. Energy prices were directly relevant to the Bank of England's outlook; it said their increase could feed through to other prices and the broader economy. The bank said the Monetary Policy Committee would assess the evidence at each meeting, with particular attention to this pass-through.

In remarks signaling a greater degree of tightening than simply holding rates steady, Waller said he believed a 50-basis-point rate increase should be considered at the December meeting. He warned that settling for an increase of 25 basis points could damage the bank's credibility. The Federal Reserve had kept its target rate range at 3.75%-4.00% at its previous meeting in October. Waller's call comes as October data showed headline inflation above expectations and core inflation holding at the same monthly pace for three consecutive months. These positions give the December meeting added importance in assessing the rate path, without representing a decision by the Federal Open Market Committee.

In Britain, the Bank of England raised its interest rate by a quarter of a percentage point to 4% at its meeting ending November 4, by a vote of 8 to 1. The dissenting member favored a half-point increase to 4.25%. The bank said British consumer price inflation was 3.5% in September and that it expected it to rise to about 5% by the middle of next year as the effects of energy prices continued. The pound had reached its highest level in 20 months against the euro in the previous week following the British rate increase, Reuters said. This background shows that the currency received support from the Bank of England's decision before falling against the dollar on November 10, as U.S. data and hawkish remarks supported the dollar.

Upcoming dates include the release of U.S. producer price index data for October on November 13 at 08:30 a.m. Eastern time, according to the Bureau of Labor Statistics calendar. On the same day, the Federal Reserve calendar lists a discussion by Vice Chair for Supervision Michelle Bowman at 10:50 a.m. Washington local time on supervision and regulation. The Federal Reserve will also publish minutes of the committee meeting held on October 27 and 28 on November 18 at 2:00 p.m. The Bank of England's next monetary policy meeting is scheduled for December 17. The bank said its decisions would be based on an assessment of the evidence at each meeting, particularly the pass-through of higher energy prices to prices and wages.