The Pound Sterling (GBP) is under pressure after UK inflation fell more than expected in November, paving the way for the Bank of England (BoE) to deliver a widely anticipated 25bps rate cut tomorrow. Markets now price in an accelerated easing cycle over the next year, BBH FX analysts report.

BoE poised for rate cut after weak CPI print

"GBP is underperforming across the board. UK inflation cooled more than anticipated in November, leaving room for the Bank of England (BOE) to dial up easing."

"Headline CPI fell to an eight-month low at 3.2% y/y (consensus: 3.6%, BOE projection: 3.4%) vs. 3.5% in October, core CPI dipped 0.2pts to near a  one year low at 3.2% y/y  (consensus: 3.4%), and the policy-relevant services CPI dropped 0.1pts to near a one year low at 4.4% y/y (consensus  & BOE projection: 4.5%)."

"The swaps market raised odds for a cumulative 75bps of BOE rate cuts in the next twelve months to 90% from 80%. The BOE is widely expected to trim the policy 25bps to 3.75% tomorrow. We expect GBP to continue underperforming on the crosses."