Pound near multi-year low as UK inflation eases, market awaits BoE’s next move

The British Pound hovered near multi-year lows against the US dollar as the market reacted to signs of inflation easing.

The latest inflation and core inflation data showed a lower-than-expected rise of 2.5% and 3.2%, respectively.

Producer price inflation (PPI) underscored the easing trend, with a 1.5% annual decline in December.

While factory gate prices ticked up marginally by 0.1% on a monthly basis, this increase fell short of market expectations.

These developments could lead the Bank of England (BoE) to consider rate cuts to stimulate a sluggish economy. Such a move would likely add pressure to the Pound, especially as the US Federal Reserve could maintain a hawkish stance. Meanwhile, in the bond market, the UK 10-year bond yield declined from a multi-month peak, reflecting these expectations. Further pressure on bonds could arise if GDP and production data fail to show growth in the manufacturing and industrial sectors.