GBP – UK inflation falls short of expectations, sending the pound lower

The British pound fell on Wednesday after the UK reported lower-than-expected inflation in September. The Office for National Statistics reported that the year-on-year CPI rose to 3.8% in September. Most economists polled by the Bank of England and Reuters had expected inflation to rise to 4.0% in September. The data showed that both core and services inflation also fell short of expectations, reinforcing investor expectations for a Bank of England interest rate cut later this year. Interest rate futures currently price in a roughly 75% probability that the Bank of England's Monetary Policy Committee will cut rates to 3.75% by its December meeting, up from around 46% before the data was released.

The British pound continued to come under pressure against the US dollar. As shown in the chart, the near-month exchange rate has repeatedly traded below its 100-day moving average, currently at 1.3490. This suggests that if the market fails to break through this area, the British pound could face further downward pressure against the US dollar. The current supporting level is forecasted at 1.33, with the next levels at 1.3250 and 1.32. The key targets include the 250-day moving average at 1.3080 and the 1.30. The resistance levels are the 25-day moving average at 1.3430 and the 100-day moving average at 1.3480. The next levels are expected to be 1.36 and 1.3660, and then the 1.3730 level.

Forecast range:
Resistance: 1.3430 – 1.3480 – 1.3600 – 1.3660 – 1.3730
Support: 1.3300 – 1.3250 – 1.3200 – 1.3080 – 1.3000

This Week's News:
21/10
UK Public Sector Surplus: £10.862 Billion in September
UK Public Sector Net Borrowing (excluding state-owned banks): £20.246 Billion in September

22/ 10
UK Consumer Price Index (CPI) unchanged in September
UK Consumer Price Index (CPI) rose 3.8% year-on-year in September
UK Core CPI (excluding energy, food, alcohol and tobacco) unchanged in September
UK Core CPI (excluding energy, food, alcohol and tobacco) rose 3.5% year-on-year in September
UK Retail Price Index (RPI) fell 0.4% in September
UK Retail Price Index (RPI) rose 4.5% year-on-year in September
UK Retail Price Index (RPIX) excluding mortgages fell 0.4% in September
UK Retail Price Index (RPIX) excluding mortgages fell 0.4% in September The retail price index (RPIX) rose 4.4% year-on-year in September.
UK Producer Price Index (PPI) input prices rose 0.8% year-on-year in September.
UK Producer Price Index (PPI) output prices rose 3.4% year-on-year in September.
UK Producer Price Index (PPI) input prices fell 0.1% month-on-month in September.
UK Producer Price Index (PPI) output prices remained unchanged in September.
UK core PPI output prices rose 3.6% year-on-year in September.
UK core PPI output prices rose 0.1% month-on-month in September.

Focus:
Friday
UK October GfK Consumer Confidence Index (07:01)
UK September Retail Sales (14:00)

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