GBP/USD: Sterling Gains for 2nd Day to $1.27 After Grocery Price Inflation Falls to 6.7%

A cluster of inflation data released this week showed the British economy is pulling away from price pressures.

• The GBPUSD pair moved higher for a second consecutive day on Thursday. The exchange rate briefly crossed $1.27 but proceeded to fall back slightly under the threshold. Positive economic data from the UK has traders optimistic about the prospects for the local currency.
• Grocery price inflation, released Wednesday, eased from 9.1% in November to 6.7% in December. It is the fastest monthly drop since record-keeping began in 2008. A day earlier, food prices came down to the same clip while shop-price inflation was flat in December at 4.3%.
• In that context, the Bank of England’s anticipated move to lower interest rates may be further strengthened. It is the consumer-price index report that should matter the most. Slated for release on January 17, the print is expected to show that headline inflation continues to cool, sliding under November’s 3.9% growth.