Anna 
In Wednesday’s London session, the Pound Sterling (GBP) retreated to 1.2750 against the US Dollar (USD) after hitting a fresh 10-week high at 1.2800 on Tuesday. The rally in the GBP/USD pair halted as concerns over the United Kingdom’s (UK) inflation outlook softened and the US Dollar (USD) regained strength.
Data from the British Retail Consortium (BRC) revealed that UK shop price inflation moderated in May, with prices of both food and non-food items easing significantly. Annual shop price changes in popular retail outlets in the UK grew by 0.6%, marking the slowest pace since November 2021, compared to the previous reading of 0.8%. Food price inflation also declined for the 13th consecutive month, dropping to 3.2% from 3.4% in April. The BRC noted that retailers are passing on the benefits of lower prices to consumers.
A softer UK inflation outlook raises expectations of potential rate cuts by the Bank of England (BoE), which has maintained a restrictive interest rate stance since December 2021. Investors are now eyeing the August meeting as a potential starting point for the BoE to begin the policy-normalization process.
