Yesterday, the UK December Consumer Price Index (CPI), including core CPI, came in lower than expected, causing the pound to weaken. Additionally, comments by MPC member Taylor, suggesting it makes sense to lower interest rates as a precaution, pushed the pound down to around 1.2150.
The Financial Times reported that Bank of England officials warned that 5-6 rate hikes might be needed over the next year. However, concerns about the UK’s fiscal policy, including record-high borrowing due to large tax increases under the Starmer administration, have raised doubts about the possibility of rate cuts.
While the pound may see some short-term buying, concerns over the UK’s fiscal challenges are expected to lead to renewed selling pressure on the pound.
Expected GBP/USD Range: 1.2330–1.2140
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