GBP/USD: UK Inflation Slips to 8.7%, Posing New Challenges for the Bank of England

Consumer prices for April dropped less than what the Bank of England had projected, raising prospects for more rate hikes.

• The GBPUSD seesawed early on Wednesday after the UK reported the nation’s inflation pace dropped but did not meet the Bank of England’s expectations. Consumer prices for April fell to 8.7% on an annualized basis, while the UK’s central bank was looking for an 8.4% drop.
• The British pound fluctuated rather aggressively following the report. More precisely, the GBP/USD hit a session high of $1.2470, up from an opening of $1.2410. Bears stepped in shortly after and pressured the pair to its opening levels for the day.
• While the general trend is on a downward trajectory - the drop followed a 10.1% in March - the Bank of England is now caught between a rock and a hard place. Analysts say it will likely need to keep raising rates for the foreseeable future in order to stamp out stubborn inflation, especially in food and energy prices.