GBP Under Pressure As UK Inflation Drops Ahead of BOE

UK Inflation Drops AgainThe British Pound has come under fresh selling pressure today on the back of the latest set of UK inflation figures. Headline CPI was seen printing 6.7% YoY, down from 6.8% prior and below the 7% the market was looking for. Similarly, core CPI was seen falling to 6.2%, from 6.9% prior, below the 6.8% the market was looking for. This marks the third consecutive month that inflation has fallen and sees CPI back at 18-month lows. In light of the fresh drop in inflation, traders are now adjusting their outlook for the BOE on Thursday.Shifting BOE ExpectationsThe BOE is widely expected to hike rates by a further .25% when it meets on Thursday. However, with inflation now falling steadily, traders sense that the BOE will likely signal an end to its tightening campaign beyond this meeting – with the caveat that it will remain data dependent, of course. Essentially, traders are looking for the meeting to strike a similar tone to the September ECB meeting last week. If seen, this should keep GBP pressured near-term, particularly against high yielders like CAD and also USD where hawkish Fed expectations remains. Indeed, in light of the further drop in CPI, the BOE might well choose to pause rates at this meeting, which would be firmly bearish for GBP if seen. Technical ViewsGBPUSDThe reversal lower in GBPUSD has seen the market breaking down out of the bull channel and below the 1.2659 level. The pair is now testing below the 1.2437 level and with momentum studies bearish, the focus is on a further push lower towards the 1.2171 level next.