The Consumer Price Index (CPI) in the United Kingdom rose by 3.4% year-on-year in February, a decrease from the 4.0% recorded in January, according to data released by the Office for National Statistics (ONS) on Wednesday. This figure fell short of the forecasted 3.6% increase.

The Core CPI, which excludes volatile food and energy items, increased by 4.5% year-on-year in February, down from the 5.1% growth seen in January and lower than the anticipated 4.6% reading.

On a monthly basis, UK Consumer Price Index rebounded by 0.6% in February, slightly below the expected 0.7% increase and compared to a 0.6% decline in January.

The ONS also provided additional insights:

  • UK Services CPI stood at 6.1% year-on-year in February.
  • Major contributions to the annual CPI decline came from food, restaurants, and cafes.
  • The largest upward contributions were from housing, household services, and motor fuels.

Following the release of the UK CPI data, the GBP/USD currency pair experienced significant selling pressure, dropping to test the 1.2700 level before rebounding to around 1.2720, where it currently stands. The Pound Sterling has remained relatively flat for the day.

Looking ahead, Pound Sterling traders are anticipating the release of the UK CPI data for February, scheduled for 07:00 GMT on Wednesday. The outcome of this report could have a significant impact on the Bank of England’s (BoE) interest rate outlook and the performance of the Pound Sterling.

GBP/USD reaction to the UK CPI inflation data

GBP/USD came under intense selling pressure and tested 1.2700 on the downbeat UK headline CPI data, before rebounding to near 1.2720, where it now wavers. The pair is trading modestly flat on the day.

GBP/USD:15-minutes chart

Pound Sterling price today

The table below shows the percentage change of Pound Sterling (GBP) against listed major currencies today. Pound Sterling was the weakest against the Australian Dollar.

USD -0.05%0.05%0.06%-0.06%0.30%0.10%0.05%
EUR0.05% 0.10%0.12%0.00%0.36%0.15%0.11%
GBP-0.02%-0.08% 0.00%-0.10%0.25%0.05%0.02%
CAD-0.06%-0.11%0.01% -0.11%0.24%0.04%0.00%
AUD0.05%0.00%0.11%0.11% 0.36%0.16%0.11%
JPY-0.30%-0.34%-0.25%-0.25%-0.35% -0.20%-0.24%
NZD-0.11%-0.16%-0.05%-0.05%-0.16%0.20% -0.05%
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Analysts expect the headline annual UK Consumer Price Index to rise by 3.6% in February, marking a slowdown from January’s 4.0% increase. The Core CPI is projected to decrease to 4.6% year-on-year, while monthly CPI is expected to rebound by 0.7%.

The BoE has maintained its key rate at 5.25% amid uncertainties surrounding the economic outlook. Governor Andrew Bailey emphasized the need to keep policy sufficiently restrictive, depending on incoming data.

Traders will closely monitor the CPI report, particularly focusing on food prices and services inflation, ahead of the BoE policy announcements. Expectations of a rate cut may shift based on the CPI data, potentially influencing GBP/USD movements.

The UK CPI data is set to be released on Wednesday at 07:00 GMT, with potential implications for GBP/USD trading. A higher-than-expected inflation rate could support the Pound Sterling, while a notable slowdown may prompt a downward correction towards 1.2600.

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