UK CPI expected to remain steady in June, still above BoE target
- The United Kingdom’s Office for National Statistics will publish the June CPI data on Wednesday.
- Inflation, as measured by the CPI, is foreseen steady above the BoE’s goal in June.
- The GBP/USD pair heads into the release with a firmly bearish tone
The United Kingdom (UK) June Consumer Price Index (CPI) is scheduled for release on Wednesday at 06:00 GMT. The report, released by the Office for National Statistics (ONS), is closely watched amid the potential impact of inflation data on the Bank of England (BoE) monetary policy decisions.
Inflation in the UK, as measured by the CPI, is foreseen to have risen by 0.2% on a monthly basis, matching the May reading. The annual figure is expected to be 3.4%, also unchanged from its previous reading. Finally, the annual core CPI is forecast to post 3.5% following a similar reading in the previous month.
What to expect from the next UK inflation report?
After peaking at 11.1% by the end of 2022, UK annual inflation eased towards 1.7% in September 2024, below the BoE’s goal of 2%. Interest rate cuts began in August 2024, as policymakers were cautiously optimistic that things would slowly but steadily fall into place. Then, Donald Trump won the United States (US) elections and brought his protectionist policies and tariffs. The world believes his measures will likely revive inflationary pressures; hence, most major central banks decided to ease the loosening cycles, adopting a much more cautious approach.
The Bank of England cut interest rates to 4.25% on May 8, and decided to hold the benchmark rate steady when it met on June 19. Back then, six out of nine members of the BOE’s monetary policy committee opted to hold rates, with three opting for a 25-basis-point (bps) cut. “Global uncertainty remains elevated,” officials noted, adding that monetary policy is not on a preset path. The next meeting will take place on August 7.
Meanwhile, softer-than-anticipated figures weigh on the Sterling Pound. The unexpected monthly Gross Domestic Product (GDP) contraction announced earlier this month fueled concerns about the local economic health.
The central bank would be compelled to trim rates to help growth, but inflation-related fears will force officials to remain on hold.
According to Scotiabank, when analysing the GBP/USD pair, “There have been no major data releases and market participants are looking to Wednesday’s CPI release as the next major event risk. The release is unlikely to shift expectations for the BoE, where markets are pricing one 25 bps cut at the next meeting on August 7. Recent BoE communication has been dovish, with a specific focus on concerns related to the labor market.”
How will the UK Consumer Price Index report affect GBP/USD?
With all these in mind, softer-than-anticipated figures should boost the odds for an upcoming rate cut, while increased inflationary pressures will force the BoE’s hawkish stance.
Ahead of the announcement, the GBP/USD pair pressures the 1.3400 mark, with resurgent US Dollar (USD) demand coupling with GBP weakness.
Valeria Bednarik, Chief Analyst at FXStreet, notes: “The GBP/USD pair is oversold in the near term, yet there are no technical signs it would change course. The pair has immediate support in the 1.3370 area, where it bottomed in June, with a break below it opening the door for a steeper slump towards the 1.3300 mark. Additional declines are unlikely just because UK CPI figures, but possible on a risk-related catalyst.”
Bednarik adds: “The first line of sellers, in the case of a recovery, stands at 1.3475. An advance beyond the area exposes the 1.3520 region, with gains beyond the latter likely on renewed US Dollar’s weakness.”
Finally, Bednarik states: “A steady advance beyond the 1.3400 mark should favor a run past the year high and towards the 1.3500 area, while additional gains expose the 1.3560 price zone, where GBP/USD peaked in September 2022.”
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Economic Indicator
Core Consumer Price Index (YoY)
The United Kingdom (UK) Core Consumer Price Index (CPI), released by the Office for National Statistics on a monthly basis, is a measure of consumer price inflation – the rate at which the prices of goods and services bought by households rise or fall – produced to international standards. The YoY reading compares prices in the reference month to a year earlier. Core CPI excludes the volatile components of food, energy, alcohol and tobacco. The Core CPI is a key indicator to measure inflation and changes in purchasing trends. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.
Read more.Next release: Wed Jul 16, 2025 06:00
Frequency: Monthly
Consensus: 3.5%
Previous: 3.5%
Source: Office for National Statistics
The Bank of England is tasked with keeping inflation, as measured by the headline Consumer Price Index (CPI) at around 2%, giving the monthly release its importance. An increase in inflation implies a quicker and sooner increase of interest rates or the reduction of bond-buying by the BOE, which means squeezing the supply of pounds. Conversely, a drop in the pace of price rises indicates looser monetary policy. A higher-than-expected result tends to be GBP bullish.
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