The Office for National Statistics (ONS) in the UK will soon release the Consumer Price Index (CPI) data for September. Analysts expect inflation to rise to 4% per year, the highest level since early 2024. Core inflation is also anticipated to see a slight increase. These changes could make the Bank of England (BoE) hesitant to cut interest rates in the near future. This upcoming inflation report is crucial as it comes right before the BoE’s Monetary Policy Committee meeting on November 6. A 4% inflation rate would be double the BoE’s target of 2% for price stability. The core CPI, which excludes volatile items like food and energy, is expected to rise to 3.7%, up from 3.6% in August.

Retail Prices Index Outlook

The Retail Prices Index (RPI) figures are likely to show a slight increase, reaching 4.7% year-on-year growth. The job market remains steady, with unemployment at 4.8% and a rise in net employment of 91,000. August’s GDP recorded a growth of 0.1%. A strong CPI reading could lead to delayed interest rate cuts and strengthen the Pound. On the other hand, weak data may lower the chances of monetary easing, which could impact the GBP. Recently, the BoE kept its interest rate steady at 4%. The next CPI data will be released on October 22, 2025. With the September inflation data expected today, we are paying close attention to see if it meets or exceeds the anticipated 4%. This number is crucial as it will be the last key inflation figure before the BoE’s meeting on November 6, influencing their decision. A high inflation rate suggests that the bank may keep rates higher for longer than previously thought. Persistently high services inflation has been a recurring issue throughout 2024 and 2025, preventing the overall inflation rate from approaching the 2% target. We saw similar challenges between 2022 and 2023, leading to strong policy action from the central bank. Currently, market expectations indicate almost no chance of a rate cut during the November meeting, a sentiment that a high inflation reading would reinforce.

Investment Strategies and Market Reaction

If inflation reaches the expected 4%, it should confirm that the BoE will hold steady, lowering expectations for rate cuts. This scenario may suggest strategies like buying short-term call options on GBP/USD or selling out-of-the-money puts to earn premium. With August GDP growth at 0.1%, the BoE has room to maintain a more restrictive policy. Conversely, if the data comes in lower than expected, speculation about a rate cut before the end of the year would resurface, potentially putting pressure on the Pound. In that case, protective put options on GBP/USD could become appealing, as the market quickly adjusts to the BoE’s potential path. Such a result might lead GBP/USD to test the support level around 1.3335 noted last week. Given the significance of this release, we expect increased short-term implied volatility for GBP currency pairs. Traders anticipating a notable market reaction, regardless of direction, might consider straddle or strangle strategies to benefit from the price movements. Historically, major CPI announcements have caused the pound’s value to fluctuate by as much as 0.5% to 1% within hours. After today, all eyes will turn to the policy decision on November 6. We anticipate a ‘higher for longer’ narrative, especially since recent labor market data showed an unemployment rate stabilizing at 4.8%. This supports the case for the BoE to wait for clearer signs of decreasing inflation before considering any shift toward easing. Create your live VT Markets account and start trading now.

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