Home Daily Commentaries UK Inflation Expected to Fall Below 2% for First Time Since 2021

UK Inflation Expected to Fall Below 2% for First Time Since 2021

Daily Currency Update

This week’s UK inflation release is expected to show a drop in CPI from 2.2% in August to 1.9% in September, marking the first time inflation has fallen below the Bank of England's 2% target since 2021.

The report will provide key insights into whether the Bank of England (BoE) might cut interest rates in November. If inflation falls below the 2% target, expectations for a rate cut could rise, weakening the British pound as markets anticipate a more dovish policy stance. However, if inflation remains high, the BoE may take a more cautious approach, supporting the GBP and potentially boosting the GBP/USD pair, especially if the U.S. dollar weakens.

Key Movers

Another key event this week is the ECB's interest rate decision on Thursday, which will be crucial for the euro. If the ECB decides to cut rates, as some analysts expect due to weakening inflation and economic data, the euro could come under pressure. A dovish tone from ECB President Christine Lagarde could further weigh on EUR/USD, as markets may anticipate additional easing in the months ahead. Conversely, if the ECB holds rates steady, the euro could find temporary support, particularly if policymakers signal a cautious approach to future rate cuts.

Expected Ranges

  • GBP/USD: 1.3005 - 1.3095 ▼
  • GBP/EUR: 1.1915 - 1.1995 ▲
  • GBP/AUD: 1.9355 - 1.9465 ▲
  • EUR/USD: 1.0875 - 1.0955 ▼

Written by

See Wah Li

OFXpert

See Wah is passionate about supporting positive transformations when it comes to managing foreign exchange. As a Senior Currency Consultant at OFX, his goal is to help businesses make informed decisions, alleviate risks, and enhance their currency strategies for success. With over 6 years of experience in the foreign exchange market, See Wah’s strength lies in developing effective solutions to help navigate the complexities of currency fluctuations and mitigate their impacts on business profitability.