Another Supporting Report for the GBP As UK Inflation Jumps
Skerdian Meta•Wednesday, December 18, 2024•2 min read
GBP/USD has started this week on a bullish footing after a few positive reports, which have been supporting the British Pound ahead of the BOE meeting tomorrow.
GBP/USD recovered from the 1.26 level on Monday and managed to rise above 1.27 yesterday, although it remains in an overall bearish trajectory due to ongoing challenges in the UK economy. Despite strong November employment data, the pair has struggled to break past the 1.28 resistance level, with the 100 SMA acting as a significant barrier and reversing gains late last week.
Earlier this week, the pound found support at 1.26, buoyed by an increase in the UK services PMI to 51.4—a two-month high that signals modest resilience in the sector. Yesterday’s labor market report provided further momentum, showing a sharp rise of 173,000 in employment for October, surpassing expectations, while the unemployment rate held steady at 4.3%. Wage growth also accelerated, with average weekly earnings climbing by 5.2%, reflecting ongoing pressure to raise wages.
GBP/USD Chart H4 – MAs Rejected the Price
However, November payroll data showed a decline of 35,000, possibly pointing to initial signs of a cooling labor market. Today’s UK inflation report and tomorrow’s Bank of England meeting, where no change is expected to the current 4.75% interest rate, will likely influence the pair’s next moves.
UK CPI Inflation Report for November by ONS – 18 December 2024
Headline CPI (Year-over-Year):
November CPI came in at +2.6%, aligning with market expectations.
October CPI was recorded at +2.3%, marking a modest acceleration in consumer price inflation.
Core CPI (Year-over-Year):
November Core CPI rose by +3.5%, slightly below the +3.6% forecast.
October Core CPI was +3.3%, indicating a continued upward trend in prices excluding volatile items such as energy, food, alcohol, and tobacco.
Additional Observations
Monthly Comparison:
While the headline CPI increase reflects ongoing inflationary pressures, the marginal shortfall in Core CPI suggests potential stabilization in underlying price momentum.
Sector Dynamics:
Notable contributors to the inflation uptick included energy and housing-related costs, though the overall pace of price increases remains relatively subdued compared to early 2023 levels.
The UK’s November inflation report reflects a moderate rise in consumer prices, with headline CPI at 2.6% matching expectations and Core CPI slightly underperforming at 3.5%. While this suggests a potential easing in underlying inflationary pressures, persistent wage growth and sectoral disparities keep inflation risks elevated.
With the Bank of England unlikely to adjust rates in the near term, the focus remains on how inflation trends evolve in early 2024. Any unexpected spikes in price levels or wage pressures could prompt a reassessment of monetary policy, though the current trajectory points toward stabilization.
Skerdian Meta Lead Analyst.
Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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