UK inflation hits a two-year low, nearing the 2% target. Despite a modest drop in service sector inflation, market expectations for Bank of England rate cuts in June and August have plummeted. Volatility surges as GBP/USD hits a two-month high.
Today, the UK’s Consumer Price Index (CPI) figures were released. As per ForexFactory:
→ Annual CPI: actual = 2.3%; forecast = 2.1%; previous = 3.2%.
→ Annual Core CPI: actual = 3.9%; forecast = 3.6%; previous = 4.2%.
This indicates that:
→ Inflation is at its lowest level since 2021.
→ It is nearing the target rate of 2%.
However, Reuters economists had anticipated a sharper fall to 2.1%, driven by lower energy prices.
Service sector inflation, a key indicator for the Bank of England due to its economic significance, only slightly declined to 5.9% from 6%.
Consequently, CNBC reports that market expectations for the Bank of England to ease monetary policy have diminished:
→ The chance of a rate cut in June fell to 15% from 50% prior to the inflation news.
→ The probability of an August rate cut dropped to 40% from 70%.
The currency market saw heightened volatility – the GBP/USD rate surged to a two-month high of 1.27555. As the market digested the data, the price began to decline.
Technical analysis of the daily GBP/USD chart reveals:
→ The price is in a large narrowing triangle pattern that started in 2023.
→ The 1.2800 level is crucial, providing resistance last year and in 2024.
→ Today’s candlestick might form a long upper shadow, indicating persistent bearish pressure near 1.2800.
→ This pressure could push the price down to the lower boundary of the ascending channel (shown in black), marking the GBP/USD trajectory from mid-April.
At 21:00 GMT+3 today, the FOMC Meeting Minutes will be released, likely impacting the dollar’s value against other currencies. Prepare for potential volatility spikes.
FXOpen offers spreads from 0.0 pips and commissions from $1.50 per lot. Enjoy trading on MT4, MT5, TickTrader or TradingView trading platforms!
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
The subject matter and the content of this article are solely the views of the author. FinanceFeeds does not bear any legal responsibility for the content of this article and they do not reflect the viewpoint of FinanceFeeds or its editorial staff.
