Pound struggling near lows, impact of slowing inflation growth remains
Following the release of the UK’s June Consumer Price Index (CPI), which showed a significant decline from the previous month, the pound remains near its lows despite a temporary halt in the sharp decline. The year-on-year figure of +7.9% fell well below market expectations of +8.2% and significantly decreased from the previous figure of +8.7%. This has led to increased selling pressure on the pound. Market participants have factored in a terminal interest rate level for UK policy rates below 6%, down from the previous range of 6.25% to 6.50%. As a result, UK bonds are being bought, leading to a decrease in yields.
Considering these developments, the GBP has experienced a sharp decline. Additionally, given that neighboring EUR is also experiencing a calming of inflation, it is reasonable to anticipate an increase in selling pressure on the GBP gradually.