On Wednesday, September 18, the UK Inflation Report drew investor interest as the Bank of England interest rate decision loomed.
The UK core annual inflation rate unexpectedly increased from 3.3% in July to 3.6% in August.
According to the Office for National Statistics:
Ahead of the inflation numbers, the consensus was for the Bank of England to hold interest rates steady at 5.0%.
The unexpected increase in the core inflation rate to 3.6% will likely leave the Bank of England in a holding pattern. Considering the August inflation numbers, Friday’s retail sales figures are now crucial. Strong UK retail sales figures could fuel demand-driven inflation, possibly delaying a BoE rate cut in Q4 2024.
Ahead of the UK inflation report, the GBP/USD fell to a low of $1.31517 before climbing to a high of $1.31722.
However, immediately after the release of the inflation data, the GBP/USD rallied from $1.31573 to a high of $1.31783.
On Wednesday, September 18, the GBP/USD was up 0.10% to $1.31740.
Later in the session on Wednesday, the FOMC interest rate decision, economic projections, and press conference will be in focus. While the consensus is for a 25-basis point Fed rate cut, the CME FedWatch Tool gives a 65% chance of a 50-basis point Fed rate cut. The higher degree of uncertainty toward the Fed interest rate decision could expose the global markets to increased volatility.
With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.