The UK consumer price index surged in October to 4.2% year-over-year, to register a 10-year high

It looks like the Bank of England would be the first major central bank to hike interest rates as soon as in December as the inflation pressure keeps mounting, putting further strain on households. According to the latest report, the UK consumer price index surged in October to 4.2% year-over-year, to register a 10-year high. The figure exceeded both the previous estimate and the expected result. Now, the CPI is more than double the target set by the central bank.

A day earlier, the data showed that the country’s jobs market turned healthier last month, which coupled with today’s inflation numbers reinforces the case for a rate hike in December by the Bank of England. As a reminder, earlier this month, the central bank surprised markets by holding interest rates at record lows. The regulator expects inflation to rise further to around 5% in the spring of 2022 before falling back toward its 2% target by late 2023.

In a knee-jerk reaction to the inflation report, the GBPUSD pair surged to one-week highs around 1.3475 before retreating partially in recent trading. Of note, the pound keeps gradually recovering from fresh 2021 lows despite the rallying dollar. The greenback soared on Tuesday amid much stronger-than-expected US retail sales data, with the report pointing to healthy household spending as American consumers are preparing for a 2021 holiday season.

The cable has settled above the 1.3400 figure these days, but downside risks persist as long as the prices stay below the descending 20-DMA that arrives just below the 1.3600 figure. On the other hand, rising expectations for a rate hike by the Bank of England could help the cable resists the pressure from dollar bulls in the coming days or weeks.


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