GBP/USD shrugs as UK CPI rises less than expected

August 14, 2024 Share Print 0

The British pound is showing limited movement on Wednesday. GBP/USD is trading at 1.2844 in the European session, down 0.15% on the day.

UK inflation report supports case for September rate cut

Headline inflation in the UK rose 2.2% y/y in July, up from 2% in June but below the market estimate of 2.3%. Perhaps most important for the Bank of England, services inflation slowed to 5.2%, the lowest since June 2022 and well below the BoE’s forecast of 5.6%. Monthly, inflation fell 0.2% in July, down from 0.1% in June and the first decline in six months. Core inflation fell from 3.5% y/y to 3.3% and monthly from 0.2% to 0.1%, also below expectations.

The soft inflation report supports the case for another rate cut in September, which the money markets have priced in at 45%. The BoE joined the new phase of the central banking cycle when it cut rates on August 1 by a quarter-point to 5%. The BoE meets next on September 19.

The UK released a mixed employment report on Tuesday. The unemployment rate dipped to 4.2% in the second quarter, down from 4.4% in Q1 and wage growth with bonuses slowed from a revised 5.8% y/y to 5.4%, its lowest level in two years. Still, this was much higher than the market estimate of 4.6% and is much higher than the inflation rate. Unemployment claims shot up to 135 thousand in July, blowing past the market estimate of revised 36.2 thousand and the market estimate of 4.6%.

GBP/USD Technical

There is resistance at 1.2833 and 1.2903
1.2792 and 1.2722 are the next support levels

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Kenny Fisher

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A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including Investing.com, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.