UK CPI set to show receding inflation in June as GBP/USD fails at May highs

• The UK’s ONR Office publishes the June CPI data on Wednesday.
• The UK headline CPI is expected to ease toward 2.7% from a year earlier.
• Core inflation is also seen easing toward 2.5% over the last 12 months.

The UK Office for National Statistics (ONS) will release the June Consumer Price Index (CPI) figures on Wednesday at 06:00 GMT, a print that will matter for markets. Consensus expectations point to inflation pressures still above the Bank of England’s (BoE) target, although losing further momentum.

UK consumer inflation remains one of the most important inputs for the BoE and typically carries real weight for the British Pound (GBP). Following the latest cautious hold by the BoE on June 18, investors now favour a steady hand by the ‘Old Lady’ at its meeting on July 30.

What to expect from the next UK inflation report?

Headline UK CPI is expected to clock 2.7% in the year to June, a tad lower than the May reading. On a monthly basis, inflation is seen gaining 0.1%, adding to the 0.2% increase recorded the previous month.

Core inflation, which strips out the more volatile food and energy components and is therefore more closely watched by the BoE, is forecast at 2.5% on an annual basis, down a tenth of percent from May.

How will the UK CPI data affect GBP/USD?

The BoE met expectations and kept the bank rate unchanged at 3.75% on June 18. However, the 7–2 vote split carried a slightly more hawkish tone, with Megan Greene joining Huw Pill in supporting a 25-basis-point increase. But the larger message is patience, with policy still firmly in wait-and-see mode and market pricing that reflects that stance.

In his latest comments last week, Governor Andrew Bailey said the renewed hostilities in the Gulf highlighted the instability facing the global economy. Turning to the UK, he argued that the country was supported by both its fiscal framework and monetary policy, while stressing that the central challenge remained economic growth.

Bailey added that the UK’s core banking system was resilient and that debt levels were not overstretched. However, he warned that sustainable economic growth would not be possible without financial stability.

Implied rates currently suggest nearly 43 basis points of tightening by year-end, while consensus sees the central bank keeping its policy rate unchanged at its next gathering on July 30.

Back to technicals, Senior Analyst at FXStreet, Pablo Piovano, notes that the recent multi-week recovery in GBP/USD appears to have encountered some initial hurdle in the 1.3550-1.3560 band near the July tops. “In case bulls regain the upper hand, the next barrier emerges at the May top at 1.3653 (May 11), followed by the YTD ceiling at 1.3868 (January 27),” he adds.

On the downside, Piovano sees initial contention at current yearly lows near 1.3140 (June 24). “Further weakness from here could expose a move toward the November 2025 base at 1.3010 (November 5),” Piovano adds.

Piovano also points out that momentum indicators remain somewhat bullish for now as the Relative Strength Index (RSI) hovers just below 54, while the Average Directional Index (ADX) near 18 suggests the current trend lacks muscle.

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