British Pound edges up within range following hotter UK inflation data

The British Pound (GBP) experienced a slight increase against the US Dollar (USD) on Monday, following the release of UK inflation data on Wednesday. The GBP/USD pair returned to the mid-range of the 1.3500s, trading just above 1.3550 at the time of writing, but remained within the previous trading range below the 1.3570 resistance level.

National Statistics reported that UK inflation accelerated in July, with the Consumer Price Index (CPI) growing by 0.3% month-over-month and 2.9% year-over-year (Y-o-Y) from 0.1% and 2.6% respectively in the previous month. The Core CPI stood at a 2.6% Y-o-Y rate, unchanged from the prior month, which matched market expectations.

The Input Producer Prices Index (PPI) showed a cooling trend, while the Output PPI remained stable, and retail prices saw their fastest increase since March. The UK employment data on Monday revealed mixed results, with the unemployment rate staying steady, employment growth slowing, and jobless claims declining unexpectedly. Wage growth accelerated after three months of stagnation, but the Pound still dipped against most of its counterparts.

Economists at ING believe the UK jobs figures were not significant enough to change the Bank of England's perspective on rate hikes this year. In the US, the focus on Wednesday was on the minutes of the Federal Open Market Committee (FOMC) meeting, which left interest rates unchanged amid the committee's divided opinion, leaving investors questioning the Federal Reserve's (Fed) near-term monetary policy outlook.

The UK CPI, released monthly by the Office for National Statistics, measures consumer price inflation, indicating the rate at which prices of goods and services bought by households rise or fall. The headline CPI is the inflation measure governing the government's target. A high reading is typically bullish for the Pound Sterling (GBP), while a low reading is bearish.

The Bank of England aims to keep inflation around 2% by adjusting monetary policy, such as increasing interest rates or reducing bond-buying.