UK: Disinflation path intact as CPI nears target – Deutsche Bank

💡 DMK Insight

UK inflation hitting 3% is a game changer for traders: here’s why. The drop to 3% year-on-year inflation, the lowest since March 2025, signals a potential shift in monetary policy from the Bank of England. Weaker core goods and food prices are easing some pressure, but the stubborn services inflation at 4.4% suggests that the central bank might still be cautious. Traders should keep an eye on interest rate expectations, as any hints of a pause or cut could lead to volatility in GBP pairs. If the BoE reacts to this data, we could see GBP/USD and EUR/GBP react sharply, especially if they break key support or resistance levels. But don’t overlook the flip side: persistent services inflation could keep the BoE on high alert, meaning rate hikes aren’t off the table just yet. Watch for upcoming economic data releases that could provide further clarity, particularly around consumer spending and wage growth, as these will be critical in shaping the BoE’s next moves.