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21.05.202600:47 ফরেক্স বিশ্লেষণ এবং পর্যালোচনা: GBP/USD. What the UK CPI Report Indicated?

The inflation growth report released on Wednesday for the UK was in the red zone. The published report showed that almost all key components fell short of forecast estimates, indicating a weakening of price pressures in the country.

The GBP/USD pair reacted weakly to the publication, as traders' attention is currently focused on geopolitical events. Market participants are waiting for a resolution to the Middle Eastern conflict, as further developments could lead to either a new spiral of escalation or a decrease in tensions, followed by a diplomatic resolution. The suspense remains, meaning the spring of expectations could "release" in favor of the dollar or against it—if market interest in risk assets increases.

And yet, despite macroeconomic releases taking a back seat for now, the report published on Wednesday should not be overlooked. It proved quite indicative—primarily because it demonstrated not only a slowdown in the overall CPI but also a noticeable weakening of inflationary pressures in the services sector, which the Bank of England traditionally monitors very closely.

Speaking in "dry numbers," the situation appears as follows: the overall consumer price index in April slowed to 2.8% year-on-year, while most analysts had forecast a drop to 3.0% (after March's jump to 3.3%). This is the slowest growth rate since March of last year. The core CPI, excluding volatile energy and food prices, also showed a sharp decline, down to 2.5% year-on-year from 3.1%. The last time this figure was at this level was almost five years ago—in September 2021.

The retail price index, which employers use when discussing "wage issues," also slowed significantly: after a March increase to 4.1%, it fell to 3.0% in April.

Inflation in the services sector decreased in April to 3.2% after soaring to 4.5% in the previous month. This is the lowest level for the indicator in the last four years.

In other words, in April, almost all key indicators of British inflation slowed, notably more than most analysts had expected. This raises a logical question: why did traders virtually ignore the report despite its sensational nature?

As previously mentioned, market participants are currently focused on geopolitics, which is shaping trading across all dollar pairs. But that is only "firstly." There is also a "secondly."

The decline in inflation in April can be explained by several key factors, many of which are temporary or technical.

Firstly, energy prices have dropped significantly. The British energy market regulator, Ofgem, reduced the cap on utility costs as of April 1, leading to a decrease in the average gas and electricity bill of about £110-120. The sharp reduction in annual household energy costs has created a powerful disinflationary effect.

Secondly, in April, the prices of airline tickets and package tours decreased by 3.3% (for comparison, last year there was a significant 27.5% surge during the Easter holidays). This dynamic is primarily explained by the calendar shift of Easter and the high base effect from last year. In 2025, the peak holiday demand occurred in April, leading to a sharp increase in prices, whereas this year, this effect shifted to an earlier period, resulting in a downward correction in April. Therefore, this is merely a statistical "redistribution" of the seasonal spike.

The slowdown in inflation in the services sector was aided by a decline in wage growth amid rising unemployment (up to 5.0%) and a reduction in vacancies. Thus, this reflects the cooling effect on the British labor market.

At the same time, the report published today contains "warning signs" that have kept the British currency afloat—in particular against the U.S. dollar.

First and foremost, the sharp rise in PPI. The Producer Price Index accelerated in April to 7.7%, the highest level in over three years. Such a pronounced contrast (slowing CPI amid rising PPI) indicates that some production costs have not yet been passed on to the end consumer but are likely to be reflected in the CPI in the coming months. In other words, if oil prices continue to rise (or even remain at current levels), and the conflict in the Middle East worsens, British inflation is set to accelerate again in the second half of the year.

Therefore, the report published on Wednesday, despite its "red tint," is unlikely to soften the Bank of England's rhetoric. The central bank will probably maintain a wait-and-see position, which is already largely priced into current GBP/USD levels.

This explains the rather phlegmatic reaction from traders in the pair.

From a technical perspective, the pair is positioned on the daily chart between the middle and lower lines of the Bollinger Bands, below the Tenkan-sen and Kijun-sen lines, but within the Kumo cloud. On the four-hour chart, the pair is located between the middle and upper lines of the Bollinger Bands, between the Tenkan-sen and Kijun-sen lines, and below the Kumo cloud. All of this indicates ongoing uncertainty.

Consider short positions after a breakout below the support level of 1.3380 (the lower boundary of the Kumo cloud on the D1). In this case, the Ichimoku indicator will form a bearish "Parade of Lines" signal. Long positions, given the current circumstances, appear risky amid escalating tensions between the U.S. and Iran.

*এখানে পোস্ট করা মার্কেট বিশ্লেষণ আপনার সচেতনতা বৃদ্ধির জন্য প্রদান করা হয়, ট্রেড করার নির্দেশনা প্রদানের জন্য প্রদান করা হয় না।

Irina Manzenko,
Analytical expert of InstaSpot
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