The Pound Sterling faces a sharp sell-off against major peers following a softer-than-expected UK inflation report. The Office for National Statistics reported that the Consumer Price Index for July came in below estimates, raising expectations for interest-rate cuts by the Bank of England.
Annual headline CPI rose by 2.2%, falling short of estimates but accelerating from the previous months. Core CPI, excluding volatile items, also decelerated more than expected. This decline was driven by slower growth in service inflation, influenced by a decrease in wage growth.
BoE policymakers have expressed relief at the slowdown in service inflation, as wage pressures have been a concern. Despite warnings of persistent inflation, the overall outlook suggests rate cuts may be necessary to control price pressures.
Market Update: GBP Drops vs USD Ahead of US Inflation Data
- The Pound Sterling falls to near 1.2820 against the US Dollar following the UK inflation report. The US Dollar index also edges higher ahead of the US CPI data for July.
- US inflation is expected to have decelerated slightly, influencing market expectations for Fed interest-rate cuts. The recent PPI report has already increased expectations for aggressive rate cuts by the Federal Reserve.
- Technical analysis shows the GBP/USD pair holding firm near the 20-day EMA, with resistance levels at 1.2840 and 1.2900. A break below 1.2665 could signal a reversal in the pair’s uptrend.
In summary, the weakening Pound Sterling and potential interest-rate cuts by central banks reflect a global trend towards lower inflation and economic uncertainty. Investors should monitor upcoming inflation data and central bank decisions to stay informed about market movements and potential investment opportunities.