Pound is under pressure as inflation remains low and investors anticipate sticky pricing.

The Pound Sterling (GBP) received considerable bids after the UK’s Consumer Price Index (CPI) report for August came in mild. Despite investors expecting a long-term increase owing to a rebound in energy costs. The GBPUSD pair fell as core inflation slowed sharply, indicating a slowing in demand for nondurable items. The UK’s Producer Price Index (PPI) for core production fell in August, indicating. That producers lost confidence in the demand forecast. Inflation reduced real income for households.

The Pound Sterling should remain volatile when the Bank of England announces its monetary policy on Thursday.

The Pound Sterling will remain volatile as the inflation report is followed by the Bank of England’s (BoE) interest rate announcement. Following a weak inflation data, BoE policymakers may declare the interest rate peak sooner. But they should continue on track to raise interest rates for the 15th time in a row on Thursday. A 25 basis point (bps) increase in interest rates will bring them to 5.50%. Bringing policy divergence with the Federal Reserve (Fed) back into balance.

Daily Market Movers: The GBP is under pressure due to a weak inflation data.

Pound Sterling fell vertically, reaching a new three-month low of 1.2330. On the back of August’s lackluster inflation data.

The monthly headline inflation rate in the United Kingdom increased. At a rapid pace. Investors expected it to accelerate at a 0.7% rate, but it slowed to 0.3%. The economy declined by 0.4% in July.

The annual headline CPI fell to 6.7% in August, down from 6.8% in July. Investors expected the economy to grow at a 7.1% annual rate.

Despite increased energy costs, headline inflation in the United Kingdom slowed in July. The annual core CPI, which excludes volatile food. And energy prices, fell sharply to 6.2%, compared to 6.8% expected and 6.9% in July.

The PPI for core output fell 0.1% month on month in August, showing. That companies cut prices at the factory gate despite a weakening demand situation.

The UK’s lackluster inflation data is anticipated to allow officials at the Bank of England to declare an interest rate peak. However, one more rate hike in September, with the meeting slated on Thursday, cannot be ruled out.

The BoE is likely to raise interest rates by 25 basis points (bps) to 5.50%, marking the central bank’s 15th consecutive climb.

Despite a weaker-than-expected inflation data, the UK economy has the highest inflation rate among the G7 countries.

The OECD forecasted on Tuesday that Britain will have the highest inflation among major affluent nations in 2023, but that it will fall to 2.9% in 2024.

On Tuesday, Deputy Governor of the Bank of England Sam Woods cautioned that increased interest rates had resulted in an increase in bank impairments. The situation is not frightening, and officials are on the case. It is being closely monitored in order to avert disaster.

The effects of increasing interest rates begin to weigh on wage growth.

Meanwhile, the effects of increasing interest rates begin to weigh on wage growth. According to XpertHR, salary growth slowed to a median of 5% in the three months ended in August, down from a 5.4% increase in the previous quarter.

“For the remainder of the year, we can expect settlements and pay increases to gradually begin to fall,” said Sheila Attwood, senior content manager at XpertHR.

The US Dollar has turned sideways following a V-shaped rebound over the key resistance level of 105.00, as investors remain wary about the Fed’s monetary policy, which will be unveiled in the late New York session.

The Fed is projected to leave interest rates steady at 5.25% to 5.50%, despite persistently low inflation. but labor growth stays consistent.

Investors will pay close attention to interest rate guidance for the remainder of the year. As robust talks about another rate hike this year may increase the chances of an economic slowdown.

The recent surge in oil costs has put pressure on inflation. Which may require Fed policymakers to keep an eye on another interest rate hike.