The pound weakened after UK inflation data surprised markets, coming in below expectations. The figures suggested a less pressing need for the Bank of England to raise interest rates aggressively, leading investors to reassess their positions.

Analysts pointed to the slower growth in the Consumer Price Index (CPI) as the primary driver behind the currency’s decline. The unexpected moderation in inflation has fueled speculation that the central bank may adopt a more cautious approach to tightening monetary policy in the coming months.

The market reaction reflects the sensitivity of the pound to interest rate expectations. With inflation no longer appearing as rampant as previously feared, traders have scaled back their bets on further rate hikes, putting downward pressure on the currency.

However, some economists cautioned against reading too much into a single data point, noting that underlying inflationary pressures may still persist. They argued that the Bank of England is likely to remain vigilant and could still raise rates further if necessary.

The pound’s trajectory will likely depend on future economic data releases and the central bank’s communication regarding its policy outlook. Market participants will be closely monitoring these developments to gauge the future direction of the currency.