The British pound fell sharply to around $1.33 after UK inflation data came in well below expectations, reinforcing market bets that the Bank of England will deliver an interest rate cut on Thursday. Annual inflation slowed to 3.2% in November, undershooting forecasts of 3.5% and the central bank’s own projection of 3.4%. Earlier in the week, labour market data showed the unemployment rate rising to its highest level since 2021, while wage growth eased, albeit by less than anticipated. Meanwhile, GDP figures released last week indicated that the UK economy contracted for a second consecutive month in October. Against this backdrop, the Bank of England is widely expected to resume its easing cycle and cut the Bank Rate by 25bps to 3.75%, its lowest level since 2022, after keeping rates unchanged in September and November. Markets are now pricing in about 66bps of easing for 2026, compared to 58bps before the CPI release.