The British pound sterling has suspended its rally against the US dollar, and the currency pair is now in a corrective phase. The current GBPUSD quote is 1.2950.
Yesterday's published UK Consumer Price Index statistics for June reflected a decline to 7.9% y/y from 8.7% a month earlier. Core inflation stood at 6.9% y/y, down from 7.7% in May. This decrease in inflation, coupled with the apparent overbought condition of the pound, seems to be the reason for its decline. With prices trending downward, it is likely that the Bank of England will not need to rush into raising interest rates.
The input producer price index (PPI) fell by 1.3% m/m following a previous 1.2% decrease. On the output side, the same indicator decreased by 0.3% m/m compared to a 0.6% decline in May.
The retail price index (RPI) also saw a decline, dropping to 10.7% y/y in June from the previous 11.3%.
All these reports indicate one thing: local price pressures have eased. While this is beneficial for the economy and consumers, it poses challenges for the GBP exchange rate.