GBP/SGD holds near 1-week high as traders weigh UK CPI data

The GBP/SGD currency pair held in proximity to a 1-week high of 1.7195 on Thursday, following a marked slowdown in UK inflation.

Data by the Office for National Statistics on Wednesday showed that UK annual headline CPI inflation had eased to 2.8% in April from 3.3% in March. This outcome fell short of the expected 3.0% reading.

UK’s core CPI inflation, which excludes food and energy, eased to 2.5% in April from 3.1% in March.

The inflation report, together with an unexpected increase in the unemployment rate to 5.0%, has prompted traders to reassess the path of Bank of England policy tightening by year-end.

UK rate futures are now pricing in 52 basis points of additional BoE tightening by December, compared with 60 basis points earlier this week.

Market participants are now looking ahead to preliminary UK Purchasing Managers’ Index readings for May, which are scheduled for release later on Thursday.

Meanwhile, ongoing political instability in the United Kingdom continued to weigh on the Pound.

Fiscal worries moderated after Andy Burnham, viewed as the leading potential challenger to UK Prime Minister Keir Starmer, stated that he would not alter the government’s borrowing limits. His stance helped ease investor concern over the prospect of a looser fiscal framework.

Still, Prime Minister Starmer maintained that he would not resign even if Burnham prevails in the upcoming by-election, raising the possibility of a leadership contest within the government.

While these developments offered some reassurance on fiscal discipline, they also highlighted ongoing political risk, which can feed into broader market perceptions of UK assets and the Pound.