The British pound paired with the US dollar is consolidating after recently experiencing weakness. The current GBPUSD exchange rate stands at 1.2630.
First, the US dollar's pressure on the pound has eased., allowing the GBP to restore some positions.
Second, inflation data has shown that the Bank of England might not need to raise the interest rate as intensively as before. According to data from the British Retail Consortium (BRC), shop price inflation fell to 6.9% in August, down from 7.6% a month earlier. The prices of meat products, potatoes and vegetable oil also decreased.
However, the price trend is very far from the Bank of England's 2% target. The slowdown may give hope that the market will see pressure on households easing in the future.
There is a possibility that food inflation will continue to slow down. The horizon will then become clearer for the Bank of England, which is considering its monetary policy options. If there is no need to hike the interest rate further, the economy will start to gradually find its equilibrium. This will also affect the GBP.