US CPI Misses Sharply at 2.7% (3.1% exp); BoE Cuts Rates to 3.75% as ECB Holds at 2% – Market Reactions

[Ben Graham]

This morning is a blessing for volatility traders and economists – A triple slate of high-tier change just landed in the past hour and a half.

Starting with the most recent releases, the US CPI (headline) for November landed at 2.7% vs 3.1% expectations – A sharp miss on high expectations and a very good sign for future cuts.

The Core measure actually came lower (2.6% vs 3% exp), reflecting a cooling in the Services sector.

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Morning US Data releases – MarketPulse Economic Calendar

Dollar Lower, Stocks higher, bonds higher (meaning yields went lower) – Classic reaction.

Last year's inflation report was a relatively cool one, leading to a higher base effect.

This release is an even more encouraging report for the Fed, giving back some credibility to its dovish members (Hi Waller and Williams!).

By the way, Jobless Claims came slightly below expectations (224K vs 225K) – Nothing much to see here.

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Market reactions to CPI 15M Charts for S&P 500, Oil, 10-Year Bonds, Gold, Bitcoin and the USD. December 18 – Source: TradingView

Read More:

• WTI Oil prices at 2025 Lows – Opportunity or Trap?
• Metals explode: Silver (XAG/USD) hits record $66 as Platinum (XPT/USD) breaks 2011 highs
• Markets Today: Nikkei at 3-Week Lows, Silver, Gold Hold the High Ground as BoE Cut Rate 25 bps, ECB Next

The Bank of England Cuts rates by 25 bps to 3.75% (Prior 4%) – Pound rallies

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Bank of England's Statement – December 18 2025 Meeting. Source: Bank of England

The heavily expected cut was a hawkish one, with Governor Bailey indicating that future cuts will be close calls.

With UK inflation still above 3% and a cooling labor picture (but still growing), the margin of operation for the Bank of England is a small one.

You can access the BoE report right here.

The vote actually came at 5-4 for the 25 bps cut, indicating some dispersion in views and making future cuts even less obvious.

There is about 1.5 cuts priced in for 2026 for the UK Main Rate.

The next decision will be on February 6, 2026.

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GBP/USD 1H Chart, December 18, 2025 – Source: TradingView

Cable is up about 700 pips after its hawkish cut and profiting even more from the miss in US CPI weighing on the USD.

Now reaching the 1.3440 to 1.35 Resistance and still evolving within an hourly Bull Channel, it will be interesting to see if there is much juice left to the current rally.

Watch the upwards channel and reaction to its highs (1.34850) if bulls manage to breach the Tuesday highs.

ECB keeps rates unchanged at 2% – Nothing new

The ECB has been a bit boring as of late.

Keeping rates unchanged, forward guidance is one indicating stable rates for the forthcoming times.

Still, the ECB pointed to sticky services inflation which it expects to see remaining high.

I encourage those who want to see more to check out this great review of the decision.

EUR/USD is forming a new range between 1.17 to 1.18 and isn't showing many signs of breaking out.

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EUR/USD 2H Chart, December 18, 2025 – Source: TradingView

Safe Trades!

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