British Pound Declines Broadly Following Unexpected Drop in UK Inflation

Written by Emily J. Thompson, Senior Investment Analyst

Source: InvestingliveForex

Updated: Dec 17 2025

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Source: InvestingliveForex

UK Inflation Data: The UK CPI year-on-year came in at 3.2%, lower than the expected 3.5%, with significant downward contributions from food, non-alcoholic beverages, and alcohol and tobacco.
Market Reaction: Following the inflation data, the pound weakened as traders anticipated a 25 basis point rate cut by the Bank of England (BoE), while the FTSE 100 index surged.
BoE Expectations: The BoE is expected to adopt a dovish stance in its upcoming monetary policy decision, potentially signaling more rate cuts in the future due to soft employment and inflation data.
Impact on Currency and Stocks: The anticipated rate cuts are likely to put downward pressure on the pound, especially against the euro, while supporting the FTSE 100 as lower interest rates may boost economic recovery.

About the author

Emily J. Thompson

Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.