“GBP/USD is edging lower as the October CPI report gives the BoE room to ease next month,” BBH analysts noted.
Headline CPI slowed to 3.6% year-over-year, down from 3.8% in September and matching the BoE’s forecast, though slightly above the 3.5% market consensus. Core inflation cooled to 3.4% y/y, in line with expectations and down from 3.5% in August.
Services inflation—the metric most relevant for BoE policy—fell more than anticipated to 4.5% y/y, marking a ten-month low and undershooting the expected 4.6% after 4.7% in September.
Market pricing has shifted accordingly. Interest-rate swaps now assign an 88% probability of a December cut, up from 80% the previous day. Over the next year, the swaps curve projects around 60 basis points of easing, with the policy rate expected to bottom in the 3.25%–3.50% range.
With the upcoming November 26 UK budget expected to exert fiscal drag, BBH sees greater scope for looser BoE policy—and consequently anticipates continued GBP underperformance across major currency pairs.
