- Pound Sterling falls after January’s UK inflation surpasses expectations.
- BoE’s Bailey predicts the inflation surge will be short-lived.
- US President Trump threatens 25% tariffs on autos, semiconductors, and pharmaceuticals.
The Pound Sterling weakens against major peers despite UK inflation accelerating beyond expectations in January. The Consumer Price Index (CPI) rose 3% year-over-year, exceeding forecasts of 2.8% and December’s 2.5%. Core CPI, which excludes volatile items, climbed to 3.7% from 3.2%, aligning with projections.
On a monthly basis, headline inflation declined by just 0.1%, slower than the expected deflation pace. Meanwhile, services inflation, closely monitored by the Bank of England (BoE), jumped to 5% from 4.4% in December.
Despite the inflation surge, the British currency remains under pressure as BoE policymakers anticipate price pressures to ease in the coming months. BoE Governor Andrew Bailey reiterated that the uptick is unlikely to be persistent and expects gradual disinflation, citing economic sluggishness as a counterforce to rising prices.
Higher inflation may limit the BoE’s ability to implement further monetary easing. Investors now turn their attention to upcoming UK Retail Sales data for January and February’s preliminary S&P Global/CIPS PMI figures, set for release on Friday.
Pound Sterling Weakens Ahead of FOMC Minutes
- GBP/USD slides to 1.2580 as the US Dollar strengthens, with the DXY rising near 107.20 ahead of the FOMC minutes release at 19:00 GMT.
- Investors seek insights into how long the Fed will maintain rates at 4.25%-4.50% after pausing its monetary expansion in January.
- Fed Chair Powell signaled rate adjustments would depend on inflation progress or labor market weakness, while SF Fed President Daly supported a “restrictive” stance.
- Trump’s renewed tariff threats on autos, semiconductors, and pharmaceuticals add to global economic concerns.
Technical Analysis: GBP/USD Faces Resistance
GBP/USD struggles below 1.2600, facing resistance at the 38.2% Fibonacci retracement and 100-day EMA at 1.2620.
The 14-day RSI hovers near 60.00; failure to sustain above may weaken bullish momentum.
Key support lies at the February 3 low of 1.2250, while the 50% Fibonacci retracement at 1.2767 acts as resistance.
