GBP/USD remains stable in the North American session on Wednesday after the recent inflation report from the United Kingdom, which caused a slight decline in the Pound Sterling, as expectations for additional easing by the Bank of England have risen. The pair is currently trading at 1.3362, remaining virtually unchanged after a decline to 1.3305 in response to the CPI data release.
GBP/USD rebounds as a more favorable risk sentiment mitigates the Sterling’s weakness following the data release. The UK CPI has held steady at 3.8% YoY, falling short of the anticipated 4% forecast, which is likely to bolster dovish expectations for the Bank of England. Services inflation remains stable at 4.7%, leading markets to anticipate 19 basis points of cuts in December.
> Sterling reduces losses following the CPI disappointment as traders focus on the forthcoming Federal Reserve and US inflation figures : The economic landscape in the US appears muted, as firms disclose earnings that suggest ongoing commitment to AI investments. In the meantime, US President Donald Trump moderated his trade discourse regarding China, which has positively influenced risk appetite over the past few days. Reports says that inflation fell short in September, with the Consumer Price Index remaining steady from August at 3.8% year-over-year, which is below the anticipated 4% rise. Core CPI decreased by 3.5% year-over-year for the same month, a decline from 3.6% in the prior month and falling short of expectations for a 3.7% increase.
Currently, Services inflation, which is more persistent than goods and closely monitored by the BoE, remained stable at 4.7%, falling short of the anticipated 4.9%. This prompted a recalibration of forecasts regarding rate reductions by the BoE, subsequent to the data publication. Market participants are currently factoring in 19 basis points of cuts for the December meeting, an increase from 11 basis points just a day prior. In the upcoming week, the Federal Reserve (Fed) is anticipated to lower rates by 25 basis points during the meeting on October 28-29, unless there are unforeseen developments in the CPI report set to be published on Friday.