Pound Sterling falls on lower than expected UK CPI figures for February.

The Pound Sterling (GBP) fell Substantially in Wednesday’s London session.  Ater the UK Office for National Statistics (ONS) released Softer than expected Consumer Price Index (CPI) data for February. Annual Headline and core Inflation rates dropped to 3.4% and 4.5%, Respectively. Lower Inflation is expected to allow Bank of England (BoE) officials to consider Reducing interest rates sooner than market Participants thought.

Soft UK Inflation Strengthens market views that the BoE would begin Lowering interest rates in August.

Investors should expect strong Volatility On Thursday. The Bank of England will release its second Monetary policy decision of 2024. Which will affect the pound Sterling. Investors expect the BoE to keep interest rates unchanged at 5.25%, although lackluster Inflation data may allow policymakers to provide slightly dovish direction on interest rates.

The Fed’s monetary policy meeting will determine the next move in the US dollar.

Meanwhile, investors remain cautious ahead of the Federal Reserve’s (Fed) policy meeting, which will be revealed at 18:00 GMT. Investors will pay close attention to the quarterly updated dot plot and economic estimates, as the Fed is projected to maintain interest rates constant in the range of 5.25% to 5.50%. The dot plot depicts Fed officials’ interest rate projections over various time ranges.

Daily Market movers: Pound Sterling falls on mild UK inflation.

The Pound Sterling is under selling pressure. The UK ONS has published lower-than-expected consumer price inflation numbers for February. Annual headline inflation fell slightly to 3.4%, below expectations of 3.6% and the previous reading of 4.0%. The monthly headline CPI increased by 0.6%, rebounding from a comparable decrease in January. Investors expected monthly headline inflation to increase at a faster pace of 0.7%.
The annual core CPI, which excludes volatile food and energy costs, fell to 4.5% from 4.6% expected and 5.1% previously. Core inflation data is widely regarded as the favored indicator by BoE policymakers when making interest rate decisions. Soft data may boost their confidence that inflation will steadily return to the goal pace of 2%. Policymakers at the Bank of England have reiterated that Rate decreases are only appropriate if they are satisfied that the inflation objective will be met.
The pound sterling is expected to remain volatile as investors focus on the Bank of England’s interest rate decision, which will be announced on Thursday.

BoE is set to retain interest rates at 5.25% for the fifth time in a row.

The BoE is set to retain interest rates at 5.25% for the fifth time in a row. Investors will be looking for hints about when the BoE will begin lowering interest rates. Currently, investors anticipate that the BoE will begin lowering interest rates after the August meeting. The lackluster inflation data announced on Wednesday is expected to confirm these views.
Meanwhile, markets remain cautious ahead of the Federal Reserve’s monetary policy decision. The CME FedWatch tool indicates that The central bank plans to keep interest rates constant between 5.25% and 5.50%. With no change in interest rates almost fully factored in, the monetary policy statement, Fed Chair Jerome Powell’s press conference, the dot plot, and economic estimates will be the primary focus.