- The National Statistics Office of the United Kingdom will publish the February CPI data on Wednesday.
- It is expected that the general and underlying inflation of the United Kingdom IPC decreases slightly in February.
- The United Kingdom CPI data could impact the sterling libra address and BOE interest rates.
The National Statistics Office (ONS) of the United Kingdom will publish the highly anticipated data of the February Consumption Price Index on Wednesday at 07:00 GMT.
The sterling pound (GBP) could experience intense volatility after the United Kingdom IPC inflation report, since it is likely to alter market expectations about future interest cuts cuts of the Bank of England (BOE).
What to expect from the next inflation report of the United Kingdom?
The United Kingdom consumer price index is expected to increase 2.9% year -on -year (YOY) in February, after a growth of 3% in January.
Reading is expected to remain away from the 2.0% target of the BOE.
The underlying CPI inflation, which excludes energy prices, food, alcohol and tobacco, is expected to be slightly lower, in 3.6% (yoy) in February, lowering from 3.7% in January.
According to a Bloomberg survey to economists, official data is expected to show that inflation of services will probably be reduced to 4.9% in February, after having jumped to 5% in January.
Meanwhile, the British monthly CPC is expected to increase 0.5% in the same period, compared to the anterior fall of 0.1%.
In the previous inflation data of the United Kingdom, TD Securities analysts said: “Inflation is expected to cool slightly, with the general figure falling to 2.8% (consensus: 2.9%; previous: 3.0%). We also hope that the underlying IPC and the services are lower, at 3.6% year -on -year (previous: 3.7% interannual) and 4.9% year -on -year (previous: previous: 5.0% year -on -year), respectively.
How will the Report of the United Kingdom Price Index to GBP/USD affect?
At its monetary policy meeting earlier this month, the Bank of England (BOE) kept interest rates at 4.5% on Thursday, warning caution about the expectations that they would cut rates in their upcoming meetings in the midst of high uncertainty about the economies of the United Kingdom and global.
“However, the vote of 8-1 to keep waiting was a hard line surprise and caused an upward adjustment in the expectations of the United Kingdom. The swaps market continues to value 50 basic points of relief in the next 12 months, but has completely eliminated any probability of an additional cut of 25 basic points after the less dovov vote of the MPC,” BBH analysts said.
Therefore, an upward surprise is needed in the general and underlying inflation data to reaffirm the prudent approach of the BOE and increase bets for less feat cuts this year. In this case, the uprising trend of the sterling pound is expected to resume, raising the GBP/USD again towards the 1,3050 barrier. On the contrary, softer inflation readings of what is expected will probably relieve the economic concerns of the United Kingdom, reviving the expectations of aggressive BOE rates cuts and extending the correction of the GBP/USD from four months.
Any reaction to the United Kingdom inflation report will probably be ephemeral, given the next British spring budget, scheduled for later on Wednesday.
Dhwani Mehta, leading analyst of the Asian session at FXSTERET, offers a brief technical perspective for the main torque and explains: “The GBP/USD is maintained above all simple mobile socks (SMA) newspaper important before the confrontation of the United Kingdom IPC, with the momentum indicator of the relative force index (RSI) of 14 days in the daily graph 50. The 50 -day SMA bullish crossing and the 100 -day SMA, confirmed on Monday, is still at stake and acts as a tail wind for the pair. “
Dhwani adds: “However, the torque needs acceptance above the 1.3000 threshold to initiate a sustained upward trend towards the maximum of November 2024 of 1,3048. The next relevant resistance is aligned at the round level of 1,3100. Alternatively, the immediate support is seen in the SMA of 21 days in 1,2863, below which the criticism of 200 days in 1,2800 will enter 1,2800 Game.
Economic indicator
Consumer Price Index (Yoy)
The IPC publishes it National Statistics and measures prices a basket of goods and services bought by households for consumption. The CPI is the main indicator to measure inflation and changes in consumption trends. A greater result than expectations is bullish for the pound, while a minor reading is bassist.
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Next publication:
LIE MAR 26, 2025 07:00
Frequency:
Monthly
Dear:
2.9%
Previous:
3%
Fountain:
Office for National Statistics
The Bank of England has the task of maintaining inflation, measured by the main consumer price index (CPI), in about 2%, which gives the monthly publication its importance. An increase in inflation implies an increasingly fast increase in interest rates or the reduction of bond purchase by the BOE, which means squeezing the offer of pounds. On the contrary, a drop in the rhythm of price increases indicates a more flexible monetary policy. A higher result than expected tends to be bullish for the GBP.
BOE FAQS
The Bank of England (BOE) decides the monetary policy of the United Kingdom. Its main objective is to achieve prices stability, that is, a constant inflation rate of 2%. Your instrument to achieve this is the adjustment of basic loan rates. The BOE sets the type to which it provides commercial banks and to which banks lend themselves to each other, determining the level of interest rates in the economy in general. This also influences the value of sterling pound (GBP).
When inflation exceeds the objective of the Bank of England, it responds by raising interest rates, which makes access to credit for citizens and companies more expensive. This is positive for sterling pound, since higher interest rates make the United Kingdom a more attractive place for world investors to invest their money. When inflation falls below the objective, it is a sign that economic growth is slowing down, and the Bank of England will consider the possibility of lowering interest rates to reduce credit in the hope that companies ask to borrow to invest in projects that generate growth, which is negative for sterling pound.
In extreme situations, the Bank of England can apply a policy called Quantitative Easing (QE). The QE is the process by which the BOE substantially increases the flow of credit in a stuck financial system. The QE is a policy of last resort when the descent of interest rates does not achieve the necessary result. The QE process implies that the Bank of England prints money to buy assets, normally state bonds or corporate bonds with AAA rating, banks and other financial institutions. Which usually translates into a weakening of the pound sterling.
The quantitative hardening (QT) is the reverse of the QE, and is applied when the economy is strengthening and inflation begins to rise. While in the QE the Bank of England (BOE) buys state and business bonds from financial institutions to encourage them to grant loans, in the QT the BOE stops buying more bonds and stops reinvesting the main one that expires of the bonds it already has. It is usually positive for sterling pound.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
