UK Inflation Misses Expectations: GBP/USD and FTSE 100 Outlook

Sterling Drops on Softer Inflation; FTSE Gains on Optimism

Sterling (GBP) faced selling pressure after UK inflation data revealed softer-than-expected figures. The Consumer Price Index (CPI) y/y fell to 2.5%, below the forecast of 2.6%, indicating easing inflationary pressures.

Core CPI also dropped to 3.2%, down from the previous 3.5%, further signaling a slowdown in underlying price growth. Producer Price Index (PPI) data showed modest input inflation at 0.1%, while output inflation remained flat, reflecting subdued price pressures across the supply chain.

In contrast, the FTSE 100 gained 0.52%, buoyed by optimism as easing inflation reduced the likelihood of aggressive rate hikes by the Bank of England. Lower inflation typically supports equity markets by improving borrowing conditions and boosting investor sentiment.

Market participants are now turning their focus to the 10-year bond auction and upcoming speeches by MPC members for potential policy direction, which could further influence Sterling and the FTSE’s performance in the coming days.

GBP/USD Technical Analysis

The GBP/USD pair is trading at $1.22191, up 0.07% for the day, reflecting mild bullish momentum. However, it remains below the pivot point at $1.23217, indicating potential bearish pressure unless this key level is breached. Immediate resistance is seen at $1.24514, with a stronger barrier at $1.25827.
On the downside, support lies at $1.20987, followed by deeper levels at $1.19575.

The technical setup highlights the 50-day EMA at $1.23071, acting as a near-term resistance. Meanwhile, the 200-day EMA at $1.25247 reinforces the broader downtrend. A move above $1.23217 could trigger bullish momentum, targeting higher resistance zones. Conversely, a break below $1.20987 could initiate sharp selling pressure, with bears eyeing $1.19575 as the next target.

FTSE – Technical Analysis

The FTSE 100 is trading at 8258.3, up 0.52% for the day, reflecting steady bullish momentum. The index remains above the pivot point at 8218.6, supporting the uptrend, with immediate resistance at 8327.2 and the next target at 8390.6. A bullish engulfing candle on the 4-hour chart signals strong buyer interest, likely driving further gains.

On the downside, immediate support lies at 8149.1, with deeper support at 8086.2 in case of a bearish reversal. The 50-day EMA at 8227.5 reinforces the bullish outlook, aligning closely with the pivot point. However, a break below 8218.6 could shift sentiment, bringing sellers back into the market.