The UK Consumer Price Index (CPI) inflation rate fell to 2.5% year-on-year in December, surprising markets with a figure lower than the anticipated 2.7%. This unexpected dip led to a positive movement for the GBP/USD pair, which extended its recovery above the 1.2200 mark during the European session on Wednesday. Investors are now closely watching the upcoming US CPI data release, which has gained significant attention following recent economic developments.
Gold prices showed resilience, recovering from earlier weekly losses and edging higher for the second consecutive day. On Wednesday, gold traded steadily in the $2,680 range, supported by a subdued US Dollar and easing US yields triggered by the previous day's US Producer Price Index (PPI) release. This easing of yields has influenced market dynamics, with the EUR/USD pair maintaining its range near 1.0300 amid a cautious risk sentiment as markets await further clarity from US inflation data.
Market participants anticipate a slight rise in the US CPI inflation rate, expected to increase by 2.9% annually in November, up from 2.7%. Meanwhile, Core CPI inflation is projected to remain steady at 3.3% from the previous year. The subdued performance of the US Dollar has provided support to currency pairs like EUR/USD, counterbalancing the dovish comments from the European Central Bank (ECB).
In light of these economic indicators, investors are keenly observing how these developments will influence future monetary policy decisions. The Pound Sterling managed to overcome the unexpected cooling in UK inflation, reflecting market adaptability amid shifting economic conditions.
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