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The pound gradually fell against the dollar this week, as UK economic data and local market events continued to disappoint. MPC minutes on Wednesday painted a fairly dovish picture of what lay ahead for future monetary policy, suggesting that weaker growth and low eurozone inflation had increased downside risks to the UK. With average earnings still struggling to keep pace with the low level of inflation, a rate hike wasn’t justified in October, or anytime soon for that matter. Less and less we’re hearing calls for a rate hike early next year and, if things continue as they are, it might not be long before we see the first hike priced in for early 2016.

UK retail sales data also disappointed on Thursday, showing a drop in September by 0.3%, giving support to the dovish stance taken by the Bank of England in the MPC minutes. This weighed on GBP/USD and the pair fell to 1.60, after starting the week closer to 1.62. There has so far been good support at the 1.60 level as investors bid slightly higher around the end of this week. On top of this, UK GDP failed to provide any nasty surprises and printed in line with expectations at 0.7% m/m.

By Alex Edwards at UKForex, an international money transfer service

US CPI (inflation) data was released earlier in the week, with the month on month number and core reading both printing at 0.1%. Although it didn’t come as a big surprise, it’s still evidence enough for the Fed to keep interest rates on hold for an extended period. That said, the dollar gradually strengthened throughout the week and attracted safe haven demand towards the end of the week as worries over Ebola intensified, with someone in New York testing positive.

The euro was weaker across the board this week. The sell-off started early in the week, as a story surfaced about the ECB considering to buy corporate bonds on the secondary market, as the central bank desperately attempt to kick start the eurozone economy.  German flash manufacturing PMI, released later in the week, gave the single currency a small boost but by that point EUR/USD was already languishing under 1.27.

Next week, the UK docket is looking quite thin. The focus will be on US data/events including the FOMC interest rate and QE decision (although there is no accompanying press conference this time) and advance GDP.   Consensus is for 3.1% growth q/q. Fed Chair Yellen is then due to speak later in the day following the GDP print. Meanwhile, inflation data is due from Europe with German (regional) preliminary CPI due on Thursday and European CPI flash estimate on Friday. Aside from these events, global markets are likely to remain jittery on any Ebola headlines.

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