Pound sterling fell vertically as the UK’s September inflation figures came in slower than expected.

The Pound Sterling (GBP) is falling sharply after the United Kingdom’s (UK) Office for National Statistics (ONS) released a lackluster Consumer Price Index (CPI) data for September. The CPI report revealed that annual headline inflation fell to 1.7%. Price pressures projected to decrease to 1.9% from 2.2% in August. Month on month, headline inflation stayed flat.

UK annual headline CPI fell below the bank’s aim of 2%.

The core CPI inflation which eliminates volatile categories such as Food, energy, oil, and tobacco – decelerated quicker than expected to 3.2%, compared to predictions of 3.4% and a previous reading of 3.6%. Services inflation, a key measure for Bank of England (BoE) authorities, increased at a lesser rate of 4.9% from 5.6% in August. A dramatic slowing in price pressures projected to drive traders to increase bets on interest rate cuts at each of the two remaining policy meetings this year.

Currently, financial market investors expect the BoE to decrease interest rates by 25 basis points (bps) at one of its policy sessions in November and December.

Market experts expected a slowing in service inflation as rise in the UK’s Average Earnings Excluding Bonuses, a pay growth measure Consumer spending in the three months ended August was the slowest in two years. The wage growth indicator increase as projected by 4.9%, slower than the previous publication of 5.1%.

Daily Market movers: Pound Sterling underperforms vs the US dollar.

In Wednesday’s London session, the pound sterling fell vertically below the psychological support level of 1.3000 against the US dollar (USD). The US Dollar remains around a more than two-month high as traders anticipate moderate interest rate decreases from the Federal Reserve (Fed) in the remaining policy meetings this year, with the US Dollar Index (DXY) maintaining gains near 103.30. In September, the Fed initiated the policy-easing cycle with a larger-than-usual rate cut of 50 basis points (bps).

According to CME FedWatch The tool, 30-day Federal Funds futures price data, predicts that interest rates will be reduced by 25 basis points at the November and December meetings.

Traders anticipate that the Fed will reduce interest rates gradually during the rest of the year.

Traders have priced out another 50 basis point rate decrease in November following a spate of better-than-expected September data from the United States (US). Which demonstrated economic resiliency. US data such as Nonfarm Payrolls (NFP) and the ISM Services PMI expanded at a rapid rate, allaying concerns about an economic downturn.

Aside from the positive US data, price pressures rose quicker than predicted in September, indicating that the war against inflation is far from over.

Investors pay particular attention to the monthly US retail sales statistics for September, which will be release on Thursday. The Retail sales statistics, a major indication of consumer spending, are expected to have increased by 0.3%.