GBP/USD Continues Moderate Correction.
The British pound sterling has paused its rally against the US dollar, entering a corrective phase. The current GBP/USD exchange rate is 1.2950.
Yesterday’s release of the UK Consumer Price Index for June showed a decline to 7.9% year-on-year from 8.7% in the previous month. Core inflation also decreased to 6.9% year-on-year, down from 7.7% in May. This drop in inflation, combined with the pound’s apparent overbought condition, appears to be the reason for its decline. As prices trend downward, the Bank of England is likely to take a cautious approach to raising interest rates.
The input Producer Price Index (PPI) fell by 1.3% month-on-month, following a previous 1.2% decrease. On the output side, the same indicator decreased by 0.3% month-on-month, compared to a 0.6% decline in May.
The Retail Price Index (RPI) also experienced a decline, dropping to 10.7% year-on-year in June from the previous 11.3%.
All these reports point to one thing: local price pressures have eased. While this may be beneficial for the economy and consumers, it poses challenges for the GBP exchange rate.
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