Sterling fell sharply on Wednesday after official data showed a steeper-than-expected drop in UK inflation, reinforcing market expectations that the Bank of England will cut interest rates later this week.

Consumer price inflation slowed to an annual rate of three point two percent in November from three point six percent in October, the lowest reading since March, driven largely by softer food and apparel prices.

The sharp undershoot of forecasts intensified bets that monetary policy will be eased, with futures markets now pricing in almost certain odds of a quarter-point reduction in the Bank of England’s base rate at its meeting this week.

The pound’s slide was particularly pronounced against the US dollar, where it lost around seven tenths of a percent as investors also weighed stronger sentiment around the greenback amid anticipation of forthcoming United States economic data and another Federal Reserve policy decision.

Sterling also weakened against the euro and other major currencies as currency markets recalibrated monetary policy expectations on both sides of the Atlantic.

The inflation surprise underscored persistent signs of a cooling UK economy, with recent official reports showing contraction in output and an uptick in unemployment, reinforcing the case for policy easing.

In contrast, the US dollar has been buoyed by its safe-haven status and the prospect of further clarity on US inflation and interest rates from the Federal Reserve.

With central banks in both London and Washington poised to make critical decisions in the coming days, financial markets remain highly sensitive to data releases and official guidance, with exchange rates reflecting shifting assessments of the global economic outlook and divergent monetary paths.