empty
21.05.2025 06:47 PM
High Inflation Supports the Pound. GBP/USD Outlook

The UK Consumer Price Index (CPI) rose from 2.6% to 3.5% in April, surprising the market, which had expected an increase to 3.3%. The core CPI also exceeded forecasts, and the Retail Price Index showed significant growth as well.

The annual inflation rate exceeded 3% for the first time since March 2024. Although a spike in inflation was expected due to base effects, the actual surge was much stronger than anticipated.

This image is no longer relevant

The Bank of England clearly foresaw such a development when it cut interest rates by a quarter point two weeks ago, while issuing a far more hawkish statement than markets expected. Now the pound has every reason to try to resume its bullish trend—especially given the string of discouraging news from the United States.

U.S. President Donald Trump failed to persuade Republicans to support his sweeping tax reform proposals. The Republican majority in the House of Representatives remains divided, and markets reacted to the comments of several party members who remain skeptical and continue to oppose the bill—with a selloff in the dollar and a drop in equity indexes.

Trump has limited time to push his reforms through Congress. Failure to do so weakens his position in trade negotiations with key partners—including the UK. Overall, the situation for the U.S. dollar now looks unconvincing, and the pound may seize the opportunity to initiate another bullish impulse.

On Thursday, several Bank of England officials are scheduled to speak, and they will likely face questions regarding the accelerated inflation. On Friday, UK retail sales data will be released. If those figures also show strong growth, expectations for Bank of England rate adjustments will be revised upward, giving the pound fresh momentum for another leg higher.

The net long position on the pound fell by £179 million last reporting week, down to £2.26 billion. Positioning remains moderately bullish, but the fair value estimate has lost momentum and slipped below the long-term average.

This image is no longer relevant

Last week, we suggested that the pound had a good opportunity to attempt another bullish push—and that is exactly what happened today following the data release. However, this alone is unlikely to sustain a continued rally, and a corrective pullback is expected. Support lies at 1.3140, and for now, there is every reason to believe the pound will not fall below this level. At the same time, high inflation could force the Bank of England to revise its rate outlook, which would almost certainly trigger further appreciation in the pound. In that case, another bullish impulse toward 1.3650 or higher could follow. But this is a less probable scenario, which would require clear weakness in the U.S. dollar.

Kuvat Raharjo,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

Strong Employment Report Supports the Canadian Dollar

Net employment change in May amounted to +8.8 thousand jobs, exceeding April's growth and presenting very strong data, especially against expectations — a loss of about 15 thousand jobs

Kuvat Raharjo 15:05 2025-06-09 UTC+2

AUD/USD. Analysis and Forecast

At the beginning of the new trading week, the AUD/USD pair is showing steady upward momentum, recovering from a slight pullback and once again approaching the highs seen in November

Irina Yanina 14:51 2025-06-09 UTC+2

USD/JPY. Analysis and Forecast

The USD/JPY pair is showing moderate weakness on Monday, dropping toward the psychological level of 144.00. The decline is driven by a combination of factors, including the strengthening

Irina Yanina 14:05 2025-06-09 UTC+2

WTI - West Texas Intermediate. Analysis and Forecast

At the start of the new week, prices for West Texas Intermediate (WTI) crude oil are attempting to stay near Friday's highs. Senior U.S. officials, including Treasury Secretary Scott Bessent

Irina Yanina 14:02 2025-06-09 UTC+2

Old Donald the Fighter Seems to Have Broken Down (there is a likelihood of continued growth in CFD contracts #NDX and #SPX)

Despite all the hardships, uncertainty, and overall market tension, stock indices persistently climb higher. Investors believe that Donald Trump will have to back down and retreat in his confrontation with

Pati Gani 10:06 2025-06-09 UTC+2

China and the U.S. Take a Serious Step Toward Each Other

The euro and the pound have recovered from Friday's losses, gradually resuming their upward movement. This is supported by the resumption of U.S.-China negotiations today, aiming to further ease tensions

Jakub Novak 09:21 2025-06-09 UTC+2

What to Pay Attention to on June 9? A Breakdown of Fundamental Events for Beginners

No macroeconomic reports are scheduled for Monday. Thus, traders will have nothing to react to during the day. There is a high probability of flat or weak movements unless Donald

Paolo Greco 05:54 2025-06-09 UTC+2

GBP/USD Overview – June 9: Nonfarms Did Not Disappoint

The GBP/USD currency pair also traded lower on Friday and even settled slightly below the moving average line. While we constantly say there are no reasons for the pound

Paolo Greco 04:03 2025-06-09 UTC+2

EUR/USD Overview – June 9: A New Episode of the "American Circus"

The EUR/USD currency pair traded with a slight decline on Friday, which was driven by decent macroeconomic data from the U.S. However, reports from the Eurozone also turned out quite

Paolo Greco 04:03 2025-06-09 UTC+2

EUR/USD. Weekly Preview. Inflation and More Inflation

The upcoming trading week will revolve around American inflation. In the United States, data will be published on the growth of the Consumer Price Index (CPI), the Producer Price Index

Irina Manzenko 02:39 2025-06-09 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.