UK inflation heats up, Pound shrugs

[Redator]

The British pound has stabilized on Wednesday and is trading at 1.3389 in the European session, up 0.07% on the day. This follows a four-day losing streak in which GBP/USD dropped 1.5%. On Tuesday, the pound fell as low as 1.3378, its lowest level since June 23.

UK inflation hotter than expected

Today's UK inflation report brought news that the Bank of England would have preferred not to hear. UK inflation in June jumped to 3.6% y/y, up from 3.4% in May and above the market estimate of 3.4%. This was the highest level since January 2024 and is a stark reminder that inflation is far from being beaten. The main drivers of inflation were higher food and transport prices. Services inflation, which has been persistently high, remained steady at 4.7%. Monthly, CPI ticked up to 0.3% from 0.2%, above the market estimate of 0.2%.

It was a similar story for core CPI, which rose to 3.7% y/y from 3.5% in May, above the market estimate of 3.5%. Monthly, core CPI climbed 0.4%, above 0.2% which was also the market estimate.

The hot inflation report will make it more difficult for the BoE to lower interest rates and the money markets have responded by paring expectations of further rate cuts. Still, expectations are that the BoE will cut rates at the August 7 meeting, with a probability of around 80%, despite today’s higher-than-expected inflation numbers.

The UK releases wage growth on Thursday, which is the final tier-1 event prior to the August meeting. Wage growth has been trending lower in recent months and if that continues in the May reading, that could cement an August rate cut.

GBP/USD Technical

• GBP/USD is testing resistance at 1.3381. Next, there is resistance at 1.3399 and 1.3409
• There is support at 1.3371 and 1.3353

GBPUSD 1-Day Chart, July 16, 2025

Opinions are the authors'; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. The provided publication is for informational and educational purposes only.
If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please refer to the MarketPulse Terms of Use.
Visit https://www.marketpulse.com/ to find out more about the beat of the global markets.
© {CURRENT_YEAR} OANDA Business Information & Services Inc.