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The UK Inflation reading is much weaker than expected, and provides some validity behind why BoE Governor Mark Carney repeated some cautious views over the UK economy last week.
Most will link the low price of oil and decline in inflation together, but the unexpected and continued weak core inflation reading pinpoints that UK inflation woes stretch much of oil.
This will not only further push back any faint expectations for a UK interest rate rise anytime soon, but it will also strengthen the BoE’s well-known and continuously dovish views on UK i nflation.
Can we expect the GBPUSD to continue to fall? Not really, and you could suggest that traders priced this news in early following the pair slipping from 1.58 at the beginning of the week.
When the GBPUSD closed above 1.55 a fortnight ago, it set a new upper trading range and it would need to close before 1.55 before traders could expect any
further than the decline
in the price additional bearish momentum.
If you’re pessimistic about the US economy and expecting a dovish FOMC Minutes on Wednesday, then we could see the pair bounce back later this week.