UK/£ passes another test with headline inflation holding steady

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waterman
Written by Dan Waterman
September 17th 2025
FX market remains stagnant as traders await Fed interest rate decision & further guidance tonight..

Headline UK inflation for August offered financial markets no surprise this morning, coming out as expected and the same as last (3.8%).

The more important core inflation number slowed as expected to 3.6% from 3.8% and services inflation fell more than anticipated from 5% to 4.7%. All-in-all, this was a very good result for both the UK and the Pound. 

An even better result was the news yesterday that Microsoft, Google, Nvidia, OpenAI and other firms were contributing £30Bn into the UK, strengthening US-UK ties on AI, quantum and nuclear. 

The "Tech Prosperity Deal" arrives just as US President Trump does for his second state visit to the UK. The partnership is a significant one in all forms. Particularly that thousands of high-skilled jobs will be created and an enormous boost to the UK's economy is expected and quickly (10% increase in 5-years cited).

Today/tonight all eyes are on the Federal Reserve who are strongly expected to cut interest rates by 25bp. It feels like the move is very necessary even without all the Trump pressure, as attention turns to the preservation of jobs rather than taming inflation. 

Financial market volatility will occur if 50bp is the result and/or Fed Chair Powell offers forward guidance on future rate cuts.