GBP/USD: Sterling Rises Above $1.27 as UK Inflation Posts Surprise Uptick to 2.3%

UK currency was buoyed higher by rising inflation in October, likely complicating the Bank of England’s rate-cutting trajectory.

• The GBPUSD pair shifted gears to the upside after the latest economic data out of the UK showed a surprise uptick in inflation. The consumer price index for October showed headline inflation reared up again, hitting 2.3%. The readout surpassed September’s 1.7% clip and also topped expectations of a 2.2% rise. This is most likely a curveball thrown at the Bank of England (BoE) as it came above the central bank’s 2% target.
• The sterling shot above $1.27 immediately after the news as rising inflation suggests prospects of appreciation for the UK currency. Moreover, the US dollar has been showing some signs of weakness across the board. This said, the sterling could use some nudge to the upside — it’s on track to exit a seven-week long losing streak not seen in a decade. In that time span, the sterling wiped out about 3% of its valuation.
• What does higher inflation mean for interest rate cuts? The Bank of England may now decide to skip lowering interest rates at its December 19 meeting in order to see if price growth is trending or it’s a one-off blip on the chart. Earlier this month, the UK central bank slashed borrowing costs by 25 basis points and vowed to monitor incoming data and assess its next moves amid increased economic uncertainty.