UK Inflation Fears Mount
Written by
Daily Currency Update
The Bank of England’s rate-cut path grew murkier after Ofgem announced a 6.4% increase in the UK household energy price cap from April, potentially pushing inflation above the BoE’s 3.7% peak forecast for 2025.With UK CPI already rising to a 10-month high of 3% in January, some economists now predict inflation could hit 4%, double the BoE’s target. This could force policymakers to delay or even scale back the two 25-basis-point cuts currently priced in by markets before November, supporting sterling in the short term.
Key Movers
The US dollar extended its decline against a basket of currencies as weaker-than-expected US consumer confidence data and falling Treasury yields pressured the currency. Growing concerns over slowing US economic growth, inflation risks, and looming tariff deadlines on Canada and Mexico under Trump’s trade policies further dampened sentiment.Meanwhile, optimism over potential fiscal stimulus in Germany helped lift the euro, as investors anticipate increased government spending to support Europe’s largest economy. With uncertainty surrounding US policy moves, FX markets remain cautious, keeping the dollar under pressure.
Expected Ranges
- GBP/USD: 1.2615 - 1.2695 ▲
- GBP/EUR: 1.2025 - 1.2095 ▲
- GBP/AUD: 1.9955 - 2.0075 ▲
- EUR/USD: 1.0465 - 1.0545 ▲