UK inflation rises, complicating BoE rate cuts and pushing GBP/USD to a yearly high of 1.3468
by VT Markets
/
May 22, 2025
Consumer Price Index and Inflation Issues
The UK Consumer Price Index (CPI) rose from 2.6% in March, mainly due to higher costs for water, gas, and electricity. Analysts expected the CPI to be at 3.3% and core inflation at 3.6%.
Money markets predict the Bank of England will ease rates by 35 basis points by the end of this year. In the US, there are ongoing discussions about a weaker dollar, and the G-7 is considering its potential trade effects.
This week, we expect to see key economic indicators from both the UK and the US, including Flash PMIs and jobless claims. The GBP/USD is trending upward, testing new resistance levels.
The British Pound has shown strong performance against major currencies this week, gaining an impressive 1.35% against the USD. Currency pair fluctuations are influenced by ongoing economic changes.
Sterling’s Performance and Market Effects
With inflation higher than expected, surpassing both headline and core forecasts, markets are rethinking their views on when the Bank of England will adjust rates. The jump from 2.6% to 3.5% in UK CPI breaks recent patterns and shifts attention to the Monetary Policy Committee’s next actions. Core prices, which indicate ongoing pressures, remain high, creating uncertainty about future moves. This data does not allow the central bank to relax.
Sterling’s rise to a new peak this year, fueled by the unexpected inflation, reflects traders adjusting their expectations after previously anticipating a more gradual policy easing. The increase to 1.3468 indicates a broader repositioning, influenced not only by UK developments but also by a weakening US dollar.
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by VT Markets
May 22, 2025
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