Inflationary surprise for GBP. Overview for 21.12.2023

The British pound sterling paired with the US dollar is compelled to retreat. The current GBPUSD exchange rate stands at 1.2639.

The UK’s November inflation report revealed a big surprise: the consumer price index decreased to 3.9% against the consensus forecast of 4.4%, and core inflation fell to 6.3% from the earlier 6.6%. These are significant changes, as the central bank did not expect the core inflation component to decrease before next spring.

These developments prompted investors to adjust their expectations regarding the Bank of England lowering the interest rate from June 2024 to May.

As the tendency for divergence between the interest rates of the Bank of England and the US Federal Reserve weakens, the pound is naturally declining.