On September 18, the UK inflation report attracted investors' attention as the Bank of England's interest rate decision was about to be announced.

According to the National Statistics Office, the UK's core annual inflation rate unexpectedly rose from 3.3% in July to 3.6% in August. The UK's annual inflation rate remained unchanged at 2.2% in August; the consumer price index (CPIH), which includes the cost of own housing, rose by 3.1% in the past 12 months, the same as in July; the core CPIH, excluding energy, food, alcohol and tobacco, rose by 4.3% year-on-year in August 2024, higher than 4.1% in July; the annual growth rate of CPIH services rose from 5.7% in July to 5.9% in August. The largest contribution came from air fares, offsetting the downward impact from motor vehicle fuel, catering and hotels.

Before the inflation data was released, the market generally expected the Bank of England to keep interest rates unchanged at 5.0%. However, the unexpected rise in the core inflation rate to 3.6% may keep the Bank of England on the sidelines.

Given the inflation data in August, the retail sales data on the 20th becomes crucial. If UK retail sales data is strong, it could drive demand-driven inflation, delaying the Bank of England's rate cut in the fourth quarter of 2024.

GBP/USD fell to 1.31517 before the UK inflation report was released, and then rebounded to a high of 1.31722. After the inflation data was released, GBP/USD rose from 1.31573 to 1.31783. On September 18, GBP/USD rose 0.10% to 1.31740.

Later in the day, the market's focus will turn to the Federal Open Market Committee (FOMC) interest rate decision, economic forecasts and press conference.

Although the market generally expects the Fed to cut interest rates by 25 basis points, the CME FedWatch tool shows a 65% probability of a 50 basis point rate cut. Uncertainty about the Fed's interest rate decision may lead to increased volatility in global markets.