UK inflation falls to 2.6% in June, easing BoE rate hike pressure, while PM Burnham’s spending plans weigh on sterling.
The British Pound (GBP) extends losses below 1.3400 against the US Dollar (USD), heading for a 0.6% weekly decline. The drop follows softer-than-expected UK inflation data and rising fiscal risks tied to Prime Minister Andrew Burnham’s spending plans.
UK consumer inflation slowed to 2.6% year-on-year in June, the lowest since March 2023, while producer prices undershot forecasts. The data reduces immediate pressure on the Bank of England to raise rates, delaying potential tightening. Meanwhile, investors question how Burnham will fund his fiscal pledges, undermining confidence in sterling.
Analysts warn that increased borrowing and spending could erode UK fiscal credibility, adding downward pressure on GBP. FX strategists at major banks anticipate further weakness, with support seen at 1.3340.