British Pound: Weekly Preview

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The upcoming U.K. economic data will be relatively scarce, but one report in particular could lend significant support to the British pound. On Wednesday, the Consumer Price Index (CPI) for September will be published. As highlighted in recent commentary, inflation in the U.K. has been running nearly double the Bank of England's (BoE) target for some time now—and next week it could officially surpass that benchmark twofold. Annual CPI is expected to rise by another 0.2%, reaching 4.0% year-over-year. Core inflation may increase to 3.7%.

This single report could lead the BoE to abandon any remaining plans for a rate cut before year-end. Though some economists still expect one more round of monetary easing due to rising unemployment and a cooling labor market, the case for holding rates—or even taking a more cautious stance—is growing stronger. Inflation in the U.K. has been rising steadily for more than a year. Therefore, there is no seasonal spike or short-term reaction to external shocks such as the trade war. It is a sustained trend. If the BoE continues to ease policy in this environment, inflation could climb to 5–6%, which would be highly problematic.

Aside from the CPI report, the week's other notable events include the retail sales report and the release of manufacturing and services PMI figures on Friday. As of now, there are no forecasts available for the PMI numbers. Retail sales are expected to show a month-over-month decline.

In my view, only the inflation report deserves close attention at this moment. In the U.S., there will be very few data releases due to the ongoing government shutdown. Throughout 2025, it has primarily been U.S. events and data driving market movement. Now, key reports are delayed by the shutdown, which shifts the market's focus to political and geopolitical developments. The U.S. dollar is currently contending with a wide range of challenges. As soon as the market fully prices in these risks, demand for the dollar is likely to weaken again.

Wave Analysis of EUR/USD:

Based on the current wave analysis, EUR/USD continues to build a bullish segment of the trend. The wave structure remains heavily influenced by news flows, particularly related to Trump's decisions and the internal and external policies of the new White House administration. The target zone for this trend could extend toward the 1.25 area. At present, the market appears to be forming corrective wave 4, which is nearing completion. This structure is particularly long and complex, but still fits the overall bullish trend shape. Consequently, I continue to view buying opportunities as more favorable. By year-end, I expect the euro to rise to 1.2245, which corresponds to the 200.0% Fibonacci level.

Wave Analysis of GBP/USD:

The wave structure of GBP/USD has shifted. The pair remains within a bullish impulse wave, but the internal layout has become more complex. Wave 4 is developing into a three-wave corrective pattern that is significantly longer than wave 2. The most recent downward three-wave correction appears to be complete. If confirmed, the upward movement within the global wave structure is likely to resume. Initial targets remain at 1.3800 and 1.4000. As always, price action should be confirmed by technical signals and key levels, but these wave structures provide a broader framework for medium-term trend direction.

Key Principles of This Wave Analysis:

1. Wave structures should be simple and understandable. Complicated structures are difficult to trade and are more likely to shift.
2. If there is uncertainty about market conditions, it is better to stay out.
3. There is never absolute certainty in market direction. Always use stop-loss orders.
4. Wave analysis can and should be combined with other tools and trading strategies for a comprehensive approach.

The material has been provided by InstaForex Company - www.instaforex.com