The GBPUSD exchange rate has been stuck in a recent trading range, but the UK has consumer price data ahead.
GBPUSD – Weekly Chart
The GBP/USD has been trading between the 1.3142 level and 1.3577 levels, and those are the targets for a potential breakout.
The UK is expected to have the highest rate of inflation of the G7 economies this year, according to the OECD.
The Organization for Economic Co-operation and Development (OECD) raised its prediction for UK inflation to 3.5% in 2025, with higher food costs being one issue. The group increased its forecast for UK growth this year to 1.4%, but the economy is still expected to slow next year.
The latest predictions come as Chancellor Rachel Reeves is set to release a November Budget, where she is expected to hike taxes or cut spending to address a government spending black hole.
British grocery inflation has jumped to 5.2% in the four weeks to October 5, according to industry data on Tuesday. The news is another blow to consumers already facing higher energy bills.
The figure from Worldpanel provided an early indication of pricing pressures ahead of the official inflation data this week, compared with 4.9% in last month’s report. British food retailers have said that higher employment taxes and regulatory costs were an inflationary issue, alongside staff wages.
The British Retail Consortium, which represents the country’s largest retailers, predicts that food inflation will be up as high as 6% by the end of the year, adding more pressure to household budgets in the run up to Christmas.
For the United States dollar, the current issue is trade talks with China after recent tensions. President Trump and Xi Jinping are expected to meet in Korea this month to settle their trade differences.
On the economy, James Knightley, international economist at ING, said he expects the Federal Reserve to deliver two more interest rate cuts this year. The next Fed meeting is scheduled for October 29, with CME suggesting a 95.7% chance of a rate cut.
Fed Chair Jerome Powell noted a “firmer” U.S. economy, but said that labour market downside risks were rising. The current government shutdown is another sign of that, with furloughed workers and risks of big job cuts.
U.S. Treasury Secretary Scott Bessent has said that the current shutdown could cost the economy up to $15 billion per day in lost output.
