British Pound reflects mixed performance at the start of UK data-packed week

• The British Pound exhibits a mixed performance against its peers in countdown to key UK data.
• Both the UK inflation and Japan National CPI data are expected to have grown at a faster pace in September.
• UK’s ILO Unemployment Rate is seen rising to 5% in quarter ending August.

The British Pound (GBP) trades mixed against its currency peers at the start of the United Kingdom (UK) data-packed week. Against the Japanese Yen (JPY), the British currency is almost flat at around 210.74.

This week, financial markets will pay close attention to the UK employment data for three months ending August and the Consumer Price Index (CPI) data for September, which are scheduled for Tuesday and Wednesday, respectively.

The Office for National Statistics (ONS) is expected to report that the ILO Unemployment Rate increased to 5% from 4.9% in three months ending July. Average Earnings Including Bonuses is estimated to have risen at a moderate pace of 3.8% Year-on-Year (YoY) against the previous reading of 3.9%.

Deutsche Bank sees UK inflation pushing higher and staying elevated into 2027

Economists at Deutsche Bank expect UK inflation to re-accelerate in the near term, projecting that September will mark “its highest rate all year,” with “headline CPI rising to 3.49% y-o-y, with core CPI pushing to 2.74% y-o-y.” They also look for “Services CPI, we expect, will also rise, picking up pace to 3.71% y-o-y on stronger base effects.”

Looking beyond the immediate print, Deutsche Bank warns that “price pressures” are likely to “increase further,” noting that “energy prices remain on an ascent” and that “lower harvests have already starting to show up in food cost price data.” Against this backdrop, the bank says “our updated projections see CPI taking another step up, with 2027 CPI averaging 3.7% (previously, 3.5%) from 3.2% this year,” while “headline RPI, we expect, will rise from 3.7% y-o-y to 5.2% (previously, 4.8%).”

The economists acknowledge that “our projections sit broadly above the Bank’s forecasts with the exception of two categories: core goods CPI and food & non-alcoholic beverages CPI,” and indicate they “break down how our projections look relative to the Bank of England’s below.” Summing up the trajectory, Deutsche Bank concludes: “We see headline CPI still making its way higher from here, peaking at 4.3% y-o-y in February next year. For the full year now, we see headline CPI averaging 3.2% y-o-y in 2026 and rising to 3.8% y-o-y next year (previous: 3.5%).”

The labor market and the inflation data are expected to have a significant impact on Bank of England’s (BoE) interest rate expectations for the November meeting.

This week, investors will also focus on the UK Retail Sales and preliminary S&P Global PMI data, which will be released on Friday.