Published: 18/12/2025 By ECAP
INFLATION SURPRISE
The British Pound is softer this morning after UK inflation unexpectedly dropped to 3.2% in November, below forecasts and well under the Bank of England’s own projections. This reinforces expectations that the Bank will cut the Bank Rate to 3.75% today. The weaker inflation print and persistent economic cooling continue to weigh on sterling, and markets will be looking to the BoE’s guidance for clues on further policy direction and economic support.
The Euro is steady going into the ECB policy announcement later today. The ECB is widely expected to keep its key rate unchanged at 2.0%, with recent signals pointing to an economy that has avoided recession and inflation close to target. Investors will watch for any shift in guidance on future policy or growth forecasts, though the consensus is for a “hold” outcome that supports the current Euro tone.
The U.S. Dollar is holding up ahead of this afternoon’s US CPI inflation release, which is expected to show headline and core inflation around consensus levels. These figures will be crucial in shaping market expectations for future Fed actions after the recent cut cycle. If inflation prints softer than expected, it may keep pressure on the Dollar; a firmer reading could limit further weakness.
Data supplied by GC Partners