The UK inflation showed signs of slowing in today’s report. The yearly CPI fell to 7.9% from 8.7%, which is 30 basis points lower than the market expectation. Additionally, the core CPI fell to 6.9% from 7.1%, market expectation was it to remain at 7.1%. The month-on-month (MoM) CPI was announced at 0.1%, which can be considered an acceptable level for the Bank of England.
Following the release of this data, the probability of a 50-basis point rate hike for the next meeting in the swap market fell to nearly 40% from 80%. Furthermore, the terminal rate expectation fell below 6%.
The lower CPI disrupted the significant rise of GBPUSD as it approached the key resistance level of 1.3116. The GBP experienced an upward trend, particularly after breaking out from the previous downtrend (please refer to our earlier post). Currently, there is an uptrend from October 2022. Today’s data might initiate a correction to the first support level at 1.2869 and then to the rising trendline currently situated at 1.2635. However, as long as the trend and the 50-day moving average remain intact, any downward movement could present buying opportunities over the medium term.
