Pound Rallies on Upbeat UK Inflation, Drops on Recession Fears

The Sterling pound today rallied higher against the US dollar in the early London session following the release of the latest UK inflation data, which beat expectations. The GBP/USD currency pair later trimmed its gains as fears of a recession in the UK hit investors following the inversion of the UK yield curve for the first time since the 2008 financial crisis.
The GBP/USD currency pair today rallied from a daily low of 1.2045 to a high of 1.2100 on the upbeat inflation data before retracing all its gains to trade near its daily lows.
The currency pair fell at the start of today’s session driven largely by investor sentiment before recovering its losses and trading sideways into the early European session. The pair rallied higher following the release of the UK consumer price index data for July by the Office for National Statistics. The monthly CPI print remained flat beating expectations of a 0.1% decline, while the annual print came in at 2.1% beating consensus estimates set at 1.9%. The core CPI print also beat expectations. The British producer price index data also beat consensus estimates contributing to the pair’s rally.
The currency pair later gave up its gains after the UK 2-year and 10-year yield curves inverted for the first time since 2008. Investors sold the pound even as global equity markets sold off amid widespread investor pessimism.
The currency pair’s future performance is likely to be affected by tomorrow’s UK retail sales data, Brexit developments, and trade headlines.
The GBP/USD currency pair was trading at 1.2059 as at 14:49 GMT having fallen from a high of 1.2100. The GBP/JPY currency pair was trading at 127.64 having dropped from a high of 128.65.

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