The pound sterling (GBP) underperformed its main competitors on Wednesday after the Office for National Statistics (ONS) reported that inflation rose at a faster-than-expected pace in December.
UK headline inflation rose to 3.4% year-on-year, faster than estimates of 3.3% and November’s reading of 3.2%. On a monthly basis, the overall CPI increased at the expected rate of 0.4% after falling by 0.2% in November.
The UK’s core CPI – which takes into account volatile components such as food, energy, alcohol and tobacco – grew at a steady 3.2% year-on-year (y/y) rate, as expected.
Meanwhile, service sector inflation, which is closely monitored by Bank of England (BoE) officials, accelerated to 4.5% y/y from the previous reading of 4.4%.
It is expected that signs of continued price pressure will weigh on market expectations for interest rate cuts by the BoE in the near future. At its December policy meeting, the BoE suggested that monetary policy would remain on a “gradual reduction” path.
Going forward, investors will focus on UK retail sales data for December and preliminary S&P Global Purchasing Managers’ Index (PMI) data for January. Both indicators will be published on Friday.
Today’s price of sterling
The table below shows the current percentage change of the British Pound (GBP) against the major listed currencies. The British pound was strongest against the Swiss franc.
| USD | EUR | GBP | JPY | BOOR | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.12% | 0.15% | -0.13% | 0.06% | -0.21% | -0.20% | 0.27% | |
| EUR | -0.12% | 0.03% | -0.24% | -0.07% | -0.33% | -0.31% | 0.15% | |
| GBP | -0.15% | -0.03% | -0.28% | -0.09% | -0.35% | -0.34% | 0.13% | |
| JPY | 0.13% | 0.24% | 0.28% | 0.18% | -0.08% | -0.08% | 0.40% | |
| BOOR | -0.06% | 0.07% | 0.09% | -0.18% | -0.26% | -0.25% | 0.22% | |
| AUD | 0.21% | 0.33% | 0.35% | 0.08% | 0.26% | 0.02% | 0.48% | |
| NZD | 0.20% | 0.31% | 0.34% | 0.08% | 0.25% | -0.02% | 0.47% | |
| CHF | -0.27% | -0.15% | -0.13% | -0.40% | -0.22% | -0.48% | -0.47% |
The heat map shows the percentage changes of the major currencies relative to each other. The base currency is selected from the left column and the quote currency from the top row. For example, if you select British Pound from the left column and move along the horizontal line to US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
Daily Digest Market Movers: Trump’s speech at the WEF in Davos took center stage
- The pound sterling falls to near 1.3410 against the US dollar (USD) during Wednesday’s European session. GBP/USD corrects as the US dollar rises while investors await US President Donald Trump’s speech at the World Economic Forum (WEF) in Davos.
- At the time of writing, the US Dollar Index (DXY), which tracks the value of the US dollar against six major currencies, is up 0.13% around 98.70. However, it is still close to the two-week low of 98.20 posted on Tuesday.
- The US dollar is under bulky pressure amid disputes between the US and members of the European Union (EU) over the future of Greenland. Over the weekend, US President Trump threatened to impose 10% tariffs on several EU members and the UK for opposing Washington’s plans to take over Greenland.
- In response, several EU members and officials around the world criticized Trump’s tariff threats, calling them “blackmail.” In a Tuesday interview with CNN on WEF, European Central Bank (ECB) President Christine Lagarde said Trump’s tariff threats have weakened US-EU relations. Lagarde added that companies in both economies were having difficulty assessing the “potential impact of additional tariffs.”
- Investors will be closely watching President Trump’s Davos speech for clues about what measures Washington might take to put pressure on EU members after they oppose U.S. control of Greenland.
- On the domestic front, investors are waiting for the announcement of the modern chairman of the Federal Reserve (Fed), which is expected to take place as early as next week, US Treasury Secretary Scott Bessent said on Tuesday. “There are currently four candidates for this position,” Bessent added.
Technical Analysis: GBP/USD Has Difficulty Holding 50% Fibo Retracement at 1.3395
At the time of writing, the GBP/USD rate has fallen to near 1.3405. Price is holding slightly below the 20-exponential moving average (EMA) at 1.3429, which has flattened after a steady rise, signaling consolidation.
The 14-day relative strength index (RSI) of 53 (neutral) shows slight improvement in momentum. Measured from the high at 1.3789 to the low at 1.3006, any bounce would represent a 61.8% retracement at 1.3490, while the 50% retracement at 1.3397 is a key breakout.
A break through the RSI level of 60 would reinforce the uptrend, while a drop below 50 would re-establish bearish pressure. A close of the day above retracement resistance would extend the bounce, while a break below the 20 EMA could revive a broader pullback.
(The technical analysis for this story was written with the assist of an AI tool.)
Economic indicator
Consumer price index (y/y)
The UK Consumer Price Index (CPI) published by the UK Consumer Price Index (CPI). National Statistics on a monthly basis, it is a measure of consumer price inflation – the rate of augment or decrease in the prices of goods and services purchased by households – prepared in accordance with international standards. It is a measure of inflation used for government purposes. The y/y reading compares prices in the reference month with the previous year. Generally speaking, a high reading is seen as bullish for the pound sterling (GBP), while a low reading is seen as bearish.
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