UK Inflation Drops Unexpectedly to 2.5%
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Daily Currency Update
UK inflation saw an unexpected dip last month, with the core rate, which excludes energy and food costs - falling more than anticipated.According to the Office for National Statistics, the Consumer Prices Index (CPI) rose by 2.5% in the 12 months to December, down from 2.6% in November. Economists had forecasted inflation to remain steady at 2.6%.
This development is positive for the Bank of England, which aims to maintain inflation at 2% “over the medium term,” typically within the next two years.
Markets now estimate a 74% probability of the Bank of England cutting interest rates at its February meeting.
Key Movers
The US dollar robust rally faced a temporary setback on Wednesday as traders adopted a cautious stance ahead of a pivotal U.S. consumer inflation report scheduled for release later in the day.The report, closely monitored by investors and policymakers, is expected to provide critical insights into the state of inflation in the U.S. economy. These insights could influence the Federal Reserve's monetary policy trajectory, including potential interest rate adjustments.
Expected Ranges
- GBP/USD: 1.2155 - 1.2245 ▼
- GBP/EUR: 1.1805 - 1.1895 ▼
- GBP/AUD: 1.9625 - 1.9735 ▼
- EUR/USD: 1.0255 - 1.0335 ▼