GBP/USD: Pound Seeks Direction Near $1.34 as UK Inflation Cools to 2.8% in April

GBPUSD +0.16% GBPUSD +0.06% Key points: Pound drops to $1.3380 Inflation undershoots calls Prices still expected to rise UK currency was changing for $1.34 prior to the inflation report’s release. After the news dropped, 20 pips were erased. And then recouped. 💷 Pound Trips on CPI Surprise The GBPUSD slipped briefly Wednesday after UK inflation cooled more than expected in April, taking some steam out of rate-hike bets. The pound pair dropped roughly 20 pips after the release, sliding back from the $1.34 area. But that was short-lived as the exchange rate climbed back above $1.34 a few minutes later. UK consumer inflation slowed to 2.8% in April from March’s 3.3%, according to the Office for National Statistics. Economists surveyed by Reuters were expecting a hotter 3% reading, so traders were caught leaning slightly the wrong way. For currency markets, lower inflation can mean fewer interest-rate hikes from the central bank. And fewer hikes generally weaken a currency because investors earn less yield holding it. Forex traders call this the “rate differential game.”