April UK CPI rose 2.8% YoY, below estimates, strengthening BoE rate cut expectations and weighing on the pound.
The British Pound (GBP) declined to near 1.3375 against major currencies in European trading on Wednesday after UK inflation data undershot expectations. Headline Consumer Price Index (CPI) grew 2.8% year-on-year in April, down from March’s 3.3% and below the 3% forecast.
Core inflation, excluding volatile items, fell to 2.5% from 3.1%, missing the 2.6% consensus. Month-on-month CPI rose 0.7%, slower than the 0.9% estimate. The softer-than-expected figures prompted traders to increase bets on a Bank of England interest rate cut in the near term.
The US Dollar’s recent rally, driven by expectations of a Federal Reserve rate hike, added further pressure on GBP. Investors now await UK PMI and retail sales data later this week for additional direction.