GBP/USD Rebounds After UK Inflation Softens
The pound strengthened against the US dollar on Wednesday, with GBP/USD approaching 1.3600 again after UK inflation data fell more sharply than expected and the dollar weakened amid uncertainty over US tariffs. Market sentiment has turned more dovish regarding the UK interest rate outlook, while on the US side, tariff and geopolitical concerns are keeping investors cautious.
Office for National Statistics (ONS) data shows UK CPI fell to 3.0% (y/y) in January 2026 from 3.4% in December—its lowest level since around March 2025. This decline reinforces the belief that the Bank of England (BoE) has more room to begin easing policy, especially as UK labor market data also shows weakness.
In line with the inflation data, markets are increasing bets on a BoE interest rate cut at its March 19 meeting, which BoE Governor Andrew Bailey previously called a “genuinely open question.” Expectations of this easing are the main driver of the GBP's recovery after being under pressure in recent days.
From the dollar's perspective, pressure comes from the return of uncertainty regarding US trade policy. The Trump administration has begun implementing 10% global tariffs under Section 122, and USTR Jamieson Greer has said tariffs on some countries could rise to 15% or more, although the specific countries and timing are not yet fully clear. The combination of tariff issues, the Fed's continued "higher-for-longer" interest rate direction, and the geopolitical agenda ahead of the US-Iran talks have helped maintain USD volatility and support the GBP/USD rebound. (asd)
Source: Newsmaker.id
