On Wednesday (April 16th), the GBP/USD exchange rate rose for the seventh consecutive trading day, breaking through 1.3290 during trading and setting a new high in seven months. The lower than expected inflation data in the UK has strengthened market expectations for the Bank of England to cut interest rates next month.

According to data from the UK Office for National Statistics today, the overall inflation rate in March fell to 2.6%, lower than February's 2.8% and slightly lower than the expected 2.7%. Excluding common volatile factors such as energy, food, alcohol, and tobacco, the core inflation rate also slightly decreased to 3.4%, lower than the previous month's 3.5%.

Since the beginning of this year, with the significant decline of the US dollar index, the pound/dollar exchange rate has been in a strong upward trend. After the relatively strong employment data was released in the UK on Tuesday this week, this upward trend was able to continue. Today's lower than expected inflation data did not have a significant impact on the rise of the pound.

The US dollar weakens, while the pound strengthens

Inflation pressure has cooled down for the second consecutive month, providing the Bank of England with much-needed breathing space. The rise of the pound is not only due to domestic data, but also related to the trend of the US dollar. As US inflation cools down and Trump's tariff threat intensifies market anxiety, demand for the US dollar is fluctuating.

In addition, the market increasingly believes that the Bank of England may cut interest rates as early as the regular meeting on May 8th, which creates favorable conditions for the strengthening of the pound.

Inflation is declining, and the market strongly expects the Bank of England to cut interest rates

At its last meeting in March, the Bank of England kept interest rates at 4.5% as policymakers needed to balance high inflation and uncertainty in global trade (tariffs are unpredictable). But with the inflation trend now starting to decline and macroeconomic uncertainty slightly easing, the market strongly expects a rate cut.

ING UK economist James Smith believes that the Bank of England will cut interest rates three times this year, with the next one in May.

ING analysts believe that the euro/pound is giving up some of last week's gains, but the bullish trend of the euro/dollar suggests that it can find some support around 0.85 and may return to 0.86 in the coming months. The GBP/USD exchange rate is expected to reach last year's high of 1.3430 due to the weakening of the US dollar.

At present, traders are cheering for the resilience of the pound, with seven consecutive bullish lines, which is quite good for the pound, which has experienced multiple reversals in trend this year.

The GBP/USD exchange rate will react to the US retail sales data to be released at 20:30 Beijing time, which will provide more information about the health of the US economy before Trump imposes tariffs. Economists predict that these data will show a slight decrease in retail sales in March.

At 21:15 Beijing time tonight, the United States will also release the latest industrial and manufacturing production data. Due to market participants waiting for Trump's "Liberation Day" tariff policy, it is expected that these two data points will show weakness.

technical analysis

This week, as the US dollar index fell, the pound/dollar rose to an intraday high of 1.3291, the highest level since October 3 last year.

As the upward trend continues, the currency pair has retested its upward trajectory. It has risen above the 50 day moving average, while the relative strength index (RSI) has risen to near overbought levels of 70.

The GBP/USD may continue to rise, with the next key level being the highest point of 1.3425 on September 26th.