- GBP/USD rose as expectations for further interest rate cuts this year by the Bank of England faded.
- UK CPI inflation is expected to rise 2.2% year-on-year in October and 0.5% month-on-month.
- The dollar could strengthen as traders look forward to pro-inflationary policies from the incoming Trump administration.
GBP/USD continues to rise for the third consecutive day of trading, trading around 1.2690 in Asian time on Wednesday. At Tuesday's BoE Monetary Policy Report hearing, the central bank called interest rates “moderately restrictive.”
Traders on Wednesday awaited key UK statistics, including Consumer Price Index (CPI) inflation and Retail Price Index (RPI) figures for October. These figures could influence the Bank of England's (BoE) decision on whether to press ahead with further rate cuts this year.
UK CPI inflation is expected to be 2.2% year-on-year in October, up from 1.7% in the previous month. Monthly CPI is expected to rise 0.5% in October, but was flat at 0.0% in September. Additionally, the Retail Price Index (RPI) may have increased by 3.4% from 2.7% previously.
The US dollar (USD) held steady on Wednesday after three days of declines, weighed down by weaker-than-expected economic data released on Tuesday. However, the dollar's downside may be limited as investors look forward to pro-inflationary policies from the incoming Trump administration, such as tax cuts and tariff hikes. These measures could push up inflation and cause the Federal Reserve to slow the pace of rate cuts.
Kansas City Fed President Jeffrey Schmidt said Tuesday he expects both inflation and employment to move closer to the Fed's goals. Schmidt said the rate cut reflected the central bank's confidence in inflation moving toward its 2% target. He also noted that while large budget deficits may not directly cause inflation, the Fed may need to respond to new inflationary pressures by raising interest rates.
economic indicators
Consumer price index (year-on-year change)
United Kingdom (UK) Consumer Price Index (CPI) released by UK Government Office national statistics Monthly consumer price inflation (the rate at which the prices of goods and services purchased by households increase or decrease) is measured based on international standards. This is the inflation measure used for government targeting. YoY measurements compare prices in a base month to one year ago. Generally, higher numbers are considered bullish for British Pound Sterling (GBP), while lower numbers are considered bearish.
