UK Inflation Eases, Dollar Strengthens Further
The United Kingdom’s headline Consumer Price Index (CPI) rose 3.2% year-over-year in November, down from 3.6% in October, according to data released by the Office for National Statistics (ONS) on Wednesday. This reading came in softer than market expectations of 3.5%, though it remains well above the Bank of England’s 2% inflation target.
Core CPI, which excludes volatile food and energy components, also rose 3.2% YoY in November, compared to 3.4% in October and below the forecast of 3.4%. Meanwhile, monthly CPI registered a decline of -0.2%, contrasting with a 0.4% increase in October.
The Pound Sterling (GBP) faced selling pressure following the CPI release. At the time of writing, GBP/USD is trading 0.59% lower on the day at 1.3345, reflecting a dovish shift in sentiment.
This week, the British Pound has underperformed against major currencies, especially the Japanese Yen. It has declined 0.27% against the US Dollar and 0.46% against the Yen, while showing modest gains against the Australian and New Zealand Dollars.
The Bank of England is widely expected to cut interest rates by 25 basis points to 3.75% in Thursday’s policy meeting — the lowest level since 2022. Rising unemployment and economic stagnation have eased inflationary pressures, paving the way for monetary easing.
Traders will also monitor upcoming UK Retail Sales and PPI Core Output data for further clues on the economic trajectory.
The GBP/USD pair remains under pressure as the US Dollar gains strength following mixed labor market data from the United States. The CME FedWatch tool indicates a 74.4% probability that the Federal Reserve will hold rates steady in January, up from 70% last week.
According to the Wall Street Journal, the President of the United States is scheduled to interview Fed Governor Christopher Waller on Wednesday as a candidate for the next Chair of the Federal Reserve.
Separately, Reuters reported that the President of the United States has ordered a blockade of all sanctioned oil tankers entering or leaving Venezuela. This follows the recent seizure of a tanker by US forces near Venezuelan waters.
Technically, GBP/USD is trading around 1.3390, maintaining a bullish bias on the daily chart. The pair remains within an ascending channel, with the 14-day RSI above 50. Resistance is seen near the 13-week high of 1.3536, while support lies at the 9-day EMA of 1.3362 and the psychological level of 1.3300, aligned with the 50-day EMA at 1.3295.