UK Inflation Falls to 2.1% — Forex Eyes US PCE and FOMC Minutes
UK headline CPI fell to 2.1% year‑on‑year in March 2025, with core CPI easing to 2.8%, marking the end of a 15‑month disinflationary trend driven by lower energy and normalising goods prices. The British pound initially weakened as markets priced a reduced likelihood of sustained Bank of England (BoE) tightening; money markets put a ~65% chance on a 25bp cut by August 2025, though analysts expect the BoE to hold rates at 5.25% amid still‑elevated wage growth. With UK inflation cooling, FX attention has shifted to US data: the Core Personal Consumption Expenditures (PCE) Price Index (forecast +0.3% MoM) and the March FOMC Minutes. A stronger‑than‑expected PCE or hawkish nuances in the minutes would support the US dollar and risk a further drag on GBP/USD; softer US data could weaken the USD and support pound and risk assets. Technical levels to watch: GBP/USD support near 1.2550 (next 1.2450) and resistance toward 1.2750; DXY remains sensitive to Fed communications. Traders should weigh comparative central‑bank paths and watch US PCE and FOMC details for short‑term volatility and directional signals.
Neutral
The article describes a clear macro divergence: UK inflation cooled to the BoE target, reducing immediate pressure for tighter UK policy and weakening GBP carry appeal, while US inflation signals (Core PCE) and the FOMC Minutes could either reinforce a strong USD or open the door to earlier Fed easing. For crypto markets this creates balanced forces. A stronger USD from hawkish US signals tends to be bearish for crypto (reducing USD liquidity and risk appetite), while a softer USD and improved risk sentiment would be bullish. The net impact is therefore neutral overall because the decisive driver hinges on imminent US data and Fed commentary. Historically, similar episodes (e.g., when one major economy disinflated while the US stayed strong) produced short-term USD strength and risk-asset weakness followed by rapid reversals when Fed communication turned dovish. In trading terms: expect heightened volatility around US PCE and FOMC Minutes, short-term directional trades keyed to those releases, and medium-term positioning that follows relative interest‑rate expectations and risk sentiment rather than the UK print alone.