Moderation in UK Inflation pulls GBPUSD down
UK headline CPI printed at 3.9%, much lower than the previous print of 4.6%, and below the forecast of 4.3%. The decline is broad-based, and the Bank of England (BoE) will note the moderation in services inflation. This has fuelled speculation that the BoE will cut rates next year. In this regard, British bond yields declined on the inflation news.
We note that the spread between the 2-year British gilt and the US 2-year note gapped down (red arrow) on the decline, taking the GBPUSD lower (green trendline):
Source: www.tradingview.com
The BoE has recently pushed back against the market's expectation of rate cuts, maintaining that "key indicators of UK inflation persistence remain elevated." However, today's decline is certainly a step in the right direction and may suggest that the BoE is being too pessimistic.
The market now expects 140bps of cuts in 2024.
Russell Shor
Senior Market Strategist
Russell Shor is a Senior Market Strategist at FXCM, having been promoted to the role in 2025 in recognition of his depth of insight and consistent delivery of high-impact market analysis. He originally joined FXCM in October 2017 as a Senior Market Specialist.
Russell holds an Honours Degree in Economics from the University of South Africa, is a certified FMVA®, and a full member of the Society of Technical Analysts (UK). With over 20 years of experience in financial markets, his work is renowned for its clarity, precision, and strategic value across asset classes.
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