Pound Subdued Around 1.3400 as Accelerating UK Inflation Boosts Rate Hike Bets

The British pound traded in a tight range near 1.3400 against the US dollar following stronger-than-expected UK inflation data. Headline CPI accelerated to 3.5% year-on-year in September, topping consensus forecasts of 3.4% and up from 3.1% in August, while core inflation reached 2.8% and services inflation hit 3.7%. The surge, driven by a 29.8% jump in motor fuel prices, hardened market expectations for a 25-basis-point Bank of England interest rate hike to 4.00% on November 5. However, sterling gains were capped by elevated UK government debt and US dollar safe-haven demand.