Pound Sterling "a Buy" vs Euro and Dollar on UK Inflation Beat

May 21, 2025 - Written by Tim Boyer

STORY LINK Pound Sterling "a Buy" vs Euro and Dollar on UK Inflation Beat

The Pound Sterling rose against the Euro and US Dollar on Wednesday morning after headline UK inflation rose by almost a full percentage point to 3.5% between March and April .

US Dollar weakness had provided the British Pound with a firm tailwind in Asian trading on Wednesday and stronger-than-expected UK inflation data triggered a spike higher with the Pound to Dollar (GBP/USD) exchange rate hitting a 3-year high at 1.3450.

A durable break above this level could trigger further buying from global players.

The Pound to Euro (GBP/EUR) exchange rate edged higher to 1.1860 from 1.1850.

UK consumer prices increased 1.2% in April with the year-on-year increase jumping to 3.5% from 2.6% and above consensus forecasts of 3.3%.

The core rate also increased more than expected to 3.8% from 3.4% and above market expectations of 3.6%.

The RPI rate surged to 4.5% from 3.2%.


According to the ONS, the largest upward contributions came from housing and household services, transport, and recreation and culture. This was partially offset by downward pressure from clothing and footwear.

In particular, the increase in retail energy prices was a key element.

The goods inflation rate increased to 1.7% from 0.6% while the services-sector rate posted an increase to 5.4% from 4.7%.

The stronger-than-expected inflation data, especially the strong reading for services, will be of significant concern for the Bank of England, and this is likely to rule out the potential for a further near-term cut in interest rates.

Yields will remain supportive for the Pound, but there will be stagflation fears which could dampen overall sentiment.

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TAGS: Pound Sterling Forecasts