Breaking: UK CPI inflation eases to 3.0% YoY in January, as expected
The United Kingdom (UK) headline Consumer Price Index (CPI) rose 3.0% over the year in January, compared to a rise of 3.4% in December, the data released by the Office for National Statistics (ONS) showed on Wednesday.
Markets predicted a 3.0% growth in the reported period. The UK inflation reading was well above the Bank of England’s (BoE) 2% inflation target.
The core CPI (excluding volatile food and energy items) climbed 3.1% year-over-year (YoY) in the same period, compared to December’s 3.2% print and came in line with the forecast.
Meanwhile, the monthly UK CPI arrived at -0.5% in January versus a rise of 0.4% reported in December, matching the market consensus.
GBP/USD reaction to the UK CPI inflation data
The UK CPI inflation data fails to boost the Pound Sterling (GBP). At the time of writing, the GBP/USD pair is trading 0.01% higher on the day to trade at 1.3562.
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 New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.05% | -0.01% | 0.15% | 0.10% | 0.15% | 0.81% | 0.08% | |
| EUR | -0.05% | -0.05% | 0.11% | 0.05% | 0.11% | 0.77% | 0.03% | |
| GBP | 0.00% | 0.05% | 0.12% | 0.10% | 0.16% | 0.82% | 0.08% | |
| JPY | -0.15% | -0.11% | -0.12% | -0.03% | 0.02% | 0.67% | -0.06% | |
| CAD | -0.10% | -0.05% | -0.10% | 0.03% | 0.05% | 0.71% | -0.01% | |
| AUD | -0.15% | -0.11% | -0.16% | -0.02% | -0.05% | 0.65% | -0.07% | |
| NZD | -0.81% | -0.77% | -0.82% | -0.67% | -0.71% | -0.65% | -0.73% | |
| CHF | -0.08% | -0.03% | -0.08% | 0.06% | 0.01% | 0.07% | 0.73% |
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 05:24 GMT as a preview of the UK Consumer Price Index (CPI) inflation data.
The United Kingdom (UK) Consumer Price Index (CPI) data for January is scheduled to be published today at 07:00 GMT.
The Office for National Statistics (ONS) is expected to show that the headline inflation cooled down to 3% Year-on-Year (YoY) from 3.4% in December. In the policy meeting earlier this month, the BoE stated that price pressures are expected to ease to around “3% in Q1 2026, and closer to 2% in Q2".
The core CPI – which excludes the volatile components of food, energy, alcohol, and tobacco – is estimated to have grown at a moderate pace of 3.1% against the previous reading of 3.2%. Month-on-month (MoM) headline inflation is expected to have declined by 0.5% after growing 0.4% in December.
Investors will pay close attention to the UK inflation data to get fresh cues on the Bank of England’s (BoE) monetary policy outlook. Meanwhile, dovish BoE expectations have accelerated following the release of the UK labor market data for three months ending in December on Tuesday, which showed a higher jobless rate and moderate wage growth.
How could UK CPI data affect the GBP/USD?
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GBP/USD trades slightly lower at around 1.3556 as of writing. The 20-period Exponential Moving Average (EMA) trends lower at 1.3593 and continues to cap rebounds. Price holds beneath this gauge, maintaining a short-term bearish bias.
The 14-day Relative Strength Index (RSI) at 39 (below 50) reflects subdued momentum and favors sellers.
The overall outlook of the price is bearish as it holds the breakdown of the Symmetrical Triangle formation, also known as the Volatility Contraction Pattern (VCP). Generally, a breakdown of the VCP results in wider ticks and heavy volume on the downside. Looking down, Cable could extend its decline towards the round-level figure of 1.3400 if it breaks below Tuesday's low of 1.3500.
(The technical analysis of this story was written with the help of an AI tool.)
BoE FAQs
The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).
When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.
In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.
Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.
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.
