UK CPI undershot forecasts and the Fed signaled higher-for-longer rates, driving the pound to session lows near 1.3250.
GBP/USD fell sharply Wednesday after softer-than-expected UK inflation data and a hawkish Federal Reserve decision. The pair dropped 140 pips to a session low near 1.3250, breaking below key support levels at 1.3350 and 1.3300.
UK May CPI rose just 0.2% month-over-month, missing the 0.4% forecast, while core annual inflation eased to 2.6% from an expected 2.7%. Headline inflation held at 2.8%, but the miss shifted Bank of England rate cut expectations. The Fed later held rates at 3.50%-3.75% but removed its easing bias, with the 2026 median federal funds rate projection rising to 3.8% from 3.4%.
The Fed’s Summary of Economic Projections also showed a shift from a rate cut to a hike as the next move, following a jump in the 2026 PCE inflation forecast to 3.6% from 2.7%.