Pound Sterling weakens even as UK inflation rises more than expected
- The Pound Sterling declines against its peers despite UK CPI grew at a higher-than-expected pace in December to 3.4%.
- UK core inflation remained at 3.2% YoY in December, as markets expected.
- US-EU strained relations are keeping the US Dollar under pressure.
The Pound Sterling (GBP) underperforms its major peers on Wednesday after the United Kingdom's (UK) Office for National Statistics (ONS) reported that inflation grew at a faster-than-projected pace in December.
UK headline inflation rose to 3.4% year-on-year, faster than estimates of 3.3% and the November reading of 3.2%. On a monthly basis, headline CPI grew at an expected pace of 0.4% after contracting by 0.2% in November.
The UK core CPI – which strips off volatile components such as food, energy, alcohol, and tobacco – rose at a steady pace of 3.2% year-on-year (YoY), as expected.
Meanwhile, inflation in the services sector, which is closely tracked by Bank of England (BoE) officials, accelerated to 4.5% YoY from the prior reading of 4.4%.
Signs of price pressures remaining sticky are expected to weigh on market expectations for interest rate cuts by the BoE in the near term. In the December policy meeting, the BoE guided that the monetary policy will remain on a “gradual downward” path.
Going forward, investors will focus on the UK Retail Sales data for December and the preliminary S&P Global Purchasing Managers’ Index (PMI) data for January. Both indicators will be releasedon Friday.
Pound Sterling Price Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.12% | 0.15% | -0.13% | 0.06% | -0.21% | -0.20% | 0.27% | |
| EUR | -0.12% | 0.03% | -0.24% | -0.07% | -0.33% | -0.31% | 0.15% | |
| GBP | -0.15% | -0.03% | -0.28% | -0.09% | -0.35% | -0.34% | 0.13% | |
| JPY | 0.13% | 0.24% | 0.28% | 0.18% | -0.08% | -0.08% | 0.40% | |
| CAD | -0.06% | 0.07% | 0.09% | -0.18% | -0.26% | -0.25% | 0.22% | |
| AUD | 0.21% | 0.33% | 0.35% | 0.08% | 0.26% | 0.02% | 0.48% | |
| NZD | 0.20% | 0.31% | 0.34% | 0.08% | 0.25% | -0.02% | 0.47% | |
| CHF | -0.27% | -0.15% | -0.13% | -0.40% | -0.22% | -0.48% | -0.47% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
Daily Digest Market Movers: Trump’s speech at WEF in Davos comes under spotlight
- The Pound Sterling declines to near 1.3410 against the US Dollar (USD) during the European trading session on Wednesday. The GBP/USD pair corrects as the US Dollar trades higher, while investors await United States (US) President Donald Trump’s speech at the World Economic Forum (WEF) in Davos.
- At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.13% around 98.70. Still, it is close to its two-week low of 98.20 posted on Tuesday.
- The US Dollar is broadly under pressure amid disputes between the US and European Union (EU) members over Greenland’s future. Over the weekend, US President Trump threatened to impose 10% tariffs on several EU members and the UK for opposing Washington’s plans to acquire Greenland.
- In response, several EU members and officials across the globe have criticized Trump’s tariff threats, referring to them as ”blackmail” . European Central Bank (ECB) President Christine Lagarde stated in an interview with CNN on Tuesday at the WEF that Trump’s tariff threats have undermined relations between the US and the EU. Lagarde added that companies from both economies struggle to gauge the “potential impact of additional duties”.
- President Trump's speech at Davos will be closely watched by investors for clues about which measures Washington can take to pressure EU members after opposing US control of Greenland.
- On the domestic front, investors await the announcement of the new Federal Reserve (Fed) Chairman, which is expected as early as next week, as stated by US Treasury Secretary Scott Bessent on Tuesday. “There are four candidates for the position presently,” Bessent added.
Technical Analysis: GBP/USD struggles to hold 50% Fibo retracement at 1.3395
GBP/USD trades lower to near 1.3405 at the time of writing. Price holds marginally below the 20-Exponential Moving Average (EMA) at 1.3429, which has flattened after a steady climb, signaling consolidation.
The 14-day Relative Strength Index (RSI) at 53 (neutral) shows a slight improvement in momentum. Measured from the 1.3789 high to the 1.3006 low, any rebound would confront the 61.8% retracement at 1.3490, while the 50% retracement at 1.3397 is a pivotal threshold.
A push through 60 by the RSI would strengthen bullish traction, whereas a dip under 50 would reassert bearish pressure. A daily close above the retracement resistance would extend the rebound, while a break back under the 20 EMA could revive the broader pullback.
(The technical analysis of this story was written with the help of an AI tool.)
Economic Indicator
Consumer Price Index (YoY)
The United Kingdom (UK) Consumer Price Index (CPI), released by the Office for National Statistics on a monthly basis, is a measure of consumer price inflation – the rate at which the prices of goods and services bought by households rise or fall – produced to international standards. It is the inflation measure used in the government’s target. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.
Read more.Last release: Wed Jan 21, 2026 07:00
Frequency: Monthly
Actual: 3.4%
Consensus: 3.3%
Previous: 3.2%
Source: Office for National Statistics
The Bank of England is tasked with keeping inflation, as measured by the headline Consumer Price Index (CPI) at around 2%, giving the monthly release its importance. An increase in inflation implies a quicker and sooner increase of interest rates or the reduction of bond-buying by the BOE, which means squeezing the supply of pounds. Conversely, a drop in the pace of price rises indicates looser monetary policy. A higher-than-expected result tends to be GBP bullish.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
