In January, the UK's Consumer Price Index (CPI) decreased by 0.6%, potentially paving the way for discussions of interest rate cuts by the Bank of England. However, the labor market continues to present challenges.
The UK's January inflation numbers attracted investor attention, with potential implications for Bank of England interest rate decisions. While higher-than-anticipated inflation could postpone plans for an interest rate cut, the annual inflation rate held steady at 4.0%, contrary to economists' forecast of 4.2%. Core inflation also remained unchanged at 5.1%, defying expectations of a 5.2% rate.
Month-on-month, consumer prices took a notable turn, declining by 0.6% compared to a 0.4% increase in December—contrary to economists' predicted 0.3% fall.
Key contributors to inflation included substantial increases in alcohol and tobacco prices, which rose by 12.2% over the 12 months to January. However, food and non-alcoholic beverage prices registered a lower 7.0% increase, while furniture and household goods saw a minimal 0.5% rise.
The GBP/USD showcased volatility in response to the inflation report, initially dropping to a low of $1.25837 before rebounding to a high of $1.26095. Following the report, the currency pair again fluctuated, reaching a high of $1.26050 before declining to a low of $1.25557. These movements culminated in the GBP/USD closing down 0.10% at $1.25798 on Wednesday.
140224 GBPUSD 3 Minute Chart
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