Softer UK Inflation Figures Could Ease Pressure on the BoE Tomorrow

It was a busy morning for the GBP/USD. November inflation numbers for the UK were in focus.

Following disappointing employment numbers on Tuesday, today’s CPI Report could give the Bank of England more reason to ease back on its policy plans to bring inflation to target.

In November, the UK annual inflation rate softened from 11.1% to 10.7% versus a forecasted 10.9%.

According to the Office for National Statistics,

• The Consumer Price Index, including owner occupiers’ housing costs (CPIH), increased by 9.3% in the 12 months to November 2022, down from 9.6% in October.
• Housing and household services, and food and non-alcoholic beverages, had the largest upward contributions.
• The largest downward contribution to the change in the CPI and CPIH annual inflation rates between October and November came from transport, primarily motor fuels.
• Rising prices in restaurants, cafes, and pubs made the largest contribution.

Notably, food and non-alcoholic beverage prices increased by 16.5% in the 12 months to November 2022. In October, prices were up 16.4%. Housing and household service prices increased by 11.7%, the same rate as in October.

• Monthly, the CPIH rose by 0.4% in November 2022, compared with a 0.6% increase in November 2021.
• The CPI also saw a more modest increase, rising by 0.4% in November 2022, compared with 0.7% in November 2021.

With the Bank of England delivering its final policy decision of the year on Thursday, there are no BoE speeches to comment on today’s report.

GBP/USD Price Action

At the time of writing, the Pound was down 0.09% to $1.23585.

Ahead of today’s stats, the GBP/USD fell to an early low of $1.23422 before rising to a high of $1.23778.

In response to the stats, the GBP/USD rose to a high of $1.23724 before falling to a low of $1.23533.

Next Up

It is another big US session. The Federal Reserve delivers its final interest rate decision of the year.

Following the CPI Report, the markets expect a 50-basis point rate hike. Barring a surprise move, the FOMC economic projections and the Fed Chair Powell press conference will likely have the most influence.

A less hawkish outlook on interest rates, downward revisions to inflation forecasts, and a soft landing would support riskier assets and the GBP/USD.