GBP/USD declines to 1.2200 on the back of falling UK gilts yields. | 16 January 2025

Event to pay attention to today:

15:30 EET. USD - Unemployment Claims

GBPUSD:

The UK 10-year gilt yield fell to 4.73% after official data showed an unexpected drop in UK core inflation, reinforcing expectations of a rate cut by the Bank of England (BoE).

The UK Consumer Price Index (CPI) rose 2.5% year-on-year in December, down from November's 2.6% and below the market forecast of 2.7%. Despite the slowdown, the figure remained above the Bank of England's (BoE) target of 2%.

The annualised core consumer price index, which excludes volatile food and energy, rose 3.2% in December, up from 3.5% in November, falling short of market expectations of 3.4%. In addition, services inflation fell sharply to 4.4% from 5% in November.

The US consumer price index rose 2.9% year-on-year in December, up from 2.7% in November, matching market expectations. On a monthly basis, CPI rose 0.4% after a 0.3% increase in November. The core U.S. CPI, which excludes volatile food and energy prices, rose 3.2% year-over-year in December, down slightly from the previous 3.3%. The core CPI rose 0.2% in December 2024.

Trading recommendation: Watch the level of 1.2190, when fixing below consider Sell positions, when rebounding consider Buy positions.

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