By Maria Agustina Patti

The British pound weakened as markets digested the latest inflation data and looked ahead to key economic events. The Consumer Price Index (CPI) rose by 0.1% month-on-month and 2.6% year-on-year, in line with expectations. Core inflation increased to 3.5%, slightly below market forecasts, signaling a small easing of underlying price pressures.

The benchmark 10-year gilt yield remains near its near-term high of around 4.5%, reflecting continued concerns over inflation. With central bank decisions from both the Fed and the Bank of England (BoE) on the horizon, bond market volatility is expected to stay elevated. Later today, the Federal Reserve’s anticipated 25 basis point rate cut could offer support to the Sterling, though a more hawkish tone might limit any further gains. The focus will then shift to the BoE’s meeting, where unexpected decisions could drive significant movements in both the currency and bond markets.

Oil prices increased Wednesday as U.S. crude inventories fell and the Federal Reserve cut interest rates. Brent settled at $73.39, up 20 cents, while WTI gained 50 cents to $70.58.

However, gains were limited as the Fed signaled a slower pace of future cuts, strengthening the dollar and reducing global oil demand. U.S. crude demand climbed to 20.8 million barrels per day, reflecting improving market sentiment.

Patti  is Financial Markets Strategist Consultant to Exness