UK CPI inflation leaps to 3.5% YoY in April vs. 3.3% forecast
- The United Kingdom's annual CPI rose % in April vs. 3.3% forecast.
- British inflation jumped to 1.2% MoM in April vs. a 1.1% anticipated.
- GBP/USD regains 1.3450 after UK CPI inflation data.
The United Kingdom (UK) annual headline Consumer Price Index (CPI) jumped by 3.5% in April after recording a 2.6% growth in March, the data released by the Office for National Statistics (ONS) showed on Wednesday.
The market forecast was for a 3.3% acceleration in the reported period. The reading moves further away from the Bank of England’s (BoE) 2% target.
The core CPI (excluding volatile food and energy items) rose 3.8% year-over-year (YoY) in the same period, as against a 3.4% increase in March, beating the expected print of 3.6%.
Services inflation firmed up to 5.4% YoY in April from March's 4.7%.
Meanwhile, the monthly UK CPI inflation jumped to 1.2% in April from 0.3% in March. Markets predicted a 1.1% reading.
GBP/USD reaction to the UK CPI inflation data
The UK CPI data provides a fresh boost to the Pound Sterling, driving GBP/USD briefly above 1.3450 before reversing to near 1.3432, where it now wavers. The pair is still up 0.32% on the day.
British Pound 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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.36% | -0.26% | -0.55% | -0.18% | -0.35% | -0.32% | -0.63% | |
| EUR | 0.36% | 0.10% | -0.21% | 0.16% | 0.03% | 0.04% | -0.28% | |
| GBP | 0.26% | -0.10% | -0.27% | 0.09% | -0.05% | -0.05% | -0.39% | |
| JPY | 0.55% | 0.21% | 0.27% | 0.34% | 0.19% | 0.21% | -0.10% | |
| CAD | 0.18% | -0.16% | -0.09% | -0.34% | -0.17% | -0.13% | -0.47% | |
| AUD | 0.35% | -0.03% | 0.05% | -0.19% | 0.17% | 0.02% | -0.30% | |
| NZD | 0.32% | -0.04% | 0.05% | -0.21% | 0.13% | -0.02% | -0.33% | |
| CHF | 0.63% | 0.28% | 0.39% | 0.10% | 0.47% | 0.30% | 0.33% |
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).
This section below was published at 02:15 GMT as a preview of the UK Consumer Price Index (CPI) inflation data.
- The United Kingdom’s Office for National Statistics will publish the April CPI data on Wednesday.
- Inflation, as measured by the CPI, is forecast to be much higher than in March.
- The GBP/USD pair trades near its 2025 high and aims to advance beyond it.
The United Kingdom (UK) will release the Consumer Price Index (CPI) data for April on Wednesday at 06:00 GMT. The report, released by the Office for National Statistics (ONS), has a relevant impact on the Sterling Pound (GBP) amid its potential effect on future Bank of England (BoE) monetary policy decisions.
Inflation, as measured by the CPI, is foreseen to have risen by 1.1% on a monthly basis, much higher than the 0.3% posted in March. The annual figure is expected to be 3.3%, also higher than the previous 2.6%. Finally, the annual core CPI is forecast to hit 3.7% after posting 3.4% in the previous month.
What to expect from the next UK inflation report?
The UK CPI is then seen almost doubling the BoE’s goal of 2%. The news, while discouraging, would come as no surprise.
The BoE’s last decision on monetary policy was to cut the benchmark interest rate to 4.25% from 4.5%, with five out of the nine Monetary Policy Committee (MPC) members backing such a decision. Two other voting members aimed for a larger cut, while the other two preferred to keep rates on hold.
In the accompanying statement, policymakers noted, "There is also a lot of uncertainty from global developments, partly because of changes in global trade policies. We are assessing what this could mean for UK inflation closely.” Officials also added: “We expect an increase in inflation this year. It is likely to rise temporarily, to 3.7%, partly because of higher energy prices. Inflation is expected to fall back to the 2% target after that.”
Uncertainty has dominated central banks’ messages since United States (US) President Donald Trump arrived in the White House with his protectionist policies. Massive tariffs pose a risk to global growth and inflation. While the UK is among the economies less affected by Trump’s decision, it is indeed not exempt from suffering an economic setback due to levies.
Markets are cautiously optimistic amid a 90-day pause in levies and a reduction of retaliatory tariffs between Washington and Beijing. Still, it is worth noting tensions remain in the background, with trade negotiations underway without progress being reported.
Deutsche Bank senior economist Sanjay Raja adds: “April inflation will present the biggest test for the Monetary Policy Committee so far this year”.
How will the UK Consumer Price Index report affect GBP/USD?
The inflation uptick falls within the BoE’s predictions, but that does not make it less worrisome. Generally speaking, higher than anticipated CPI figures would suggest the BoE will adopt a more hawkish stance and refrain from trimming interest rates, resulting in a firmer GBP. The opposite scenario is also valid, with softer-than-anticipated inflationary pressures leaving the door open for additional rate reductions.
Ahead of the announcement, the GBP/USD pair comfortably trades above the 1.3300 mark, roughly 100 pips away from the 2025 peak at 1.3445 amid broad US Dollar weakness. The Greenback came under selling pressure after Moody’s Investors Service, a rating agency, downgraded the United States sovereign credit rating from Aaa to Aa1 on Friday, expressing concerns about piling up debt.
Valeria Bednarik, Chief Analyst at FXStreet, expects GBP/USD to reach higher highs for the year in the upcoming days. “Given the broad USD weakness and increasing price pressures in the UK, the GBP/USD pair is likely to resume its advance and challenge the yearly peak.”
Bednarik adds: “From a technical point of view, GBP/USD is in a consolidative stage since mid-April. The daily chart shows that moving averages have turned flat, reflecting the lack of directional strength, yet the pair holds above them all, with the 20 Simple Moving Average (SMA) providing support at around the 1.3300 mark. Below such level, buyers have been defending the downside at around the 1.3250 region, while the base of the monthly range comes at 1.3140.”
Finally, Bednarik states: “A steady advance beyond the 1.3400 mark should favor a run past the year high and towards the 1.3500 area, while additional gains expose the 1.3560 price zone, where GBP/USD peaked in September 2022.”
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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FXStreet Team
FXStreet
