UK September CPI +1.7% vs +1.9% y/y expected

• Prior +2.2%
• Core CPI +3.2% vs +3.4% y/y expected
• Prior +3.6%

The pound falls as the numbers here are softer than estimated, reaffirming stronger odds for the BOE to cut rates in November. GBP/USD falls from 1.3070 to a low of 1.3018 as headline annual inflation falls back under the 2% mark for the first time since April 2021.

Looking at the details, services inflation showed a noticeable drop from 5.9% to 5.6%. In core terms, the drop is even more drastic from 5.6% to 4.9%. That’s a welcome development for the BOE surely.

Traders were pricing in ~80% odds of a 25 bps rate cut for next month coming into the data. So, this should see a bump higher to almost confirm that once the market opens later. But I wouldn’t expect sterling losses to be overextended given the pricing odds were already quite significant before this.

The 1.3000 mark remains the key supportive region to watch for cable right now.

This article was written by Justin Low at www.forexlive.com.