Premium Watchlist Recap: U.K. Inflation Reports (September 2025)

The U.K.’s inflation held steady at 3.8% y/y in September, surprising traders who expected annual prices to rise by at least 4.0%.

How did the British pound react, and which among our watchlist setups yielded the best trading opportunity?

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We’re breaking down our GBP setups this week and how each pair performed after the cooler-than-expected U.K. CPI release amid flip-flopping market sentiment.

The Setup

What We Were Watching: U.K. CPI Report for September 2025

• The Expectation: U.K. CPI was expected to print 4.0% y/y growth in September, hotter than August’s 3.8% uptick and double the Bank of England’s (BOE) target.
• Data outcome: Headline CPI remained at 3.8% y/y, while core CPI eased from 3.6% y/y to 3.5% y/y
• Market environment surrounding the event: The major assets took cues from their individual catalysts as sentiment shifted around U.S.-China trade-related headlines and geopolitical updates.

Event Outcome

U.K. inflation held steady at 3.8% y/y in September, unexpectedly coming in below the 4.0% forecast by economists and the Bank of England (BOE).

The largest downward contributions came from food and non-alcoholic beverages, where inflation fell to 4.5% from 5.1% in August, marking the first slowdown since March. Recreation and culture prices also helped ease pressure, while transport costs provided upward support due to fuel prices and volatile air travel.

The September inflation data marked a positive surprise that could put a November interest rate cut back in play, though markets remain cautious about aggressive easing expectations.

Key Takeaways:

• Headline CPI remained at 3.8% year-on-year in September, below the 4.0% consensus forecast
• Core inflation (excluding food, energy, alcohol, and tobacco) eased to 3.5% from 3.6%
• Services inflation held steady at 4.7%, below the BOE’s expectation of a rise to 5.0%
• Food inflation slowed to 4.5% from 5.1%, the first decline since March
• Markets repriced their rate cut expectations to reflect a 75% chance of a BOE rate cut by year-end, up from 46% before the data release

Fundamental Bias Triggered: Bearish GBP setups

Broad Market and Exogenous Drivers:

Tariffs Drama Continuation (Monday-Wednesday): The first half of the week was characterized by shifting US-China dynamics, with Trump downplaying their latest trade spat with China and expressing optimism about his upcoming meeting with President Xi, citing that the high level of tariffs is “unsustainable.”

Russian Geopolitics Enters the Stage (Midweek): As though trade headlines weren’t doing much of a number on overall sentiment, flaring geopolitical tensions between the U.S. and Russia took the spotlight midweek when the Trump-Putin meeting fell through and sanctions were announced on Russia’s oil giants.

Cautious Optimism and Weak U.S. Inflation (Thursday-Friday): Markets resumed their positive thinking ahead of the Trump-Xi meeting, holding out expectations that both leaders could resolve trade matters once and for all, leading to a risk rally while the safe-haven dollar also crumbled on dovish Fed expectations from a downbeat CPI print.

Meanwhile, the prolonged government shutdown (which Trump claimed would end within the week) extended the data vacuum, leaving markets to assign increased weight to limited information flow.

GBP: Bearish Event Outcome + Risk-Off Scenario

= Arguably good odds of a net positive outcome

GBP/CHF: Strong Bearish Event Outcome + Risk-Off leaning Environment

GBP/CHF wasn’t a part of our original set of watchlist list pairs, but Since we didn’t have a better scenario prepared, we thought we’d review the most likely best possible setup given the information on Wednesday (i.e., weak U.K. CPI + slight negative shift in broad risk sentiment).

GBP/CHF had been drifting gradually lower beneath a descending trend line but stalling around a short-term range between the 1.0600 major psychological level and the pivot point (1.0654) prior to the target event.

The pair was lingering just under the weekly Pivot Point and 100 SMA dynamic inflection point, which then held as a ceiling when price tumbled sharply back to the floor upon seeing downbeat U.K. CPI figures. Although the near-term support held as traders likely booked profits from the report in the sessions that followed, the pivot point resistance once again kept gains in check when it was tested later in the week.

From there, GBP/CHF picked up on stronger bearish momentum, possibly with the help of the first-ever SNB minutes as they seemed less dovish, and the bearish shift in risk sentiment due to rising geopolitical tensions on Wednesday and Thursday.  Enough so to take price below the intraweek lows, which then held as resistance before price went on to drop to S1 (1.0573)

Not Eligible to move beyond Watchlist – Bullish GBP Setups

GBP/JPY: Slightly Bullish Event Outcome + Risk-On Environment

GBP/JPY 1-Hour Forex Chart by TradingView

GBP/JPY bounced off the 202.10 Pivot Point and broke above its descending channel resistance even before the U.K.’s CPI report, just as the watchlist had anticipated. But when the inflation numbers came in weaker than expected, the upside setup was invalidated. The pair even slid back to the Pivot Point zone instead of completing the clean break-and-retest move traders were eyeing.

Guppy sentiment shifted again midweek as traders began talking about “Abenomics 2.0” on Thursday, fueling fresh yen weakness. By Friday, the focus turned to Japan’s inflation dynamics, with markets betting the numbers weren’t hot enough to justify any near-term BOJ tightening.

GBP/JPY finished the week above the channel, though more because of the yen’s relative weakness than any real pound strength.

GBP/NZD: Slightly Bullish GBP Event Outcome + Risk-Off Environment

GBP/NZD 1-Hour Forex Chart by TradingView

Last week’s watchlist looked for GBP/NZD to extend its uptrend from a potential pullback zone if the U.K.’s CPI came in as expected. At that point, comdolls were under pressure from renewed U.S.-China trade worries, while expectations for hotter U.K. inflation were giving the pound a lift.

But the U.K. CPI print missed the mark, invalidating the GBP/NZD bullish setup. The absence of new tariff threats from either Washington or Beijing also helped boost comdoll demand as overall risk sentiment improved.

GBP/NZD had already started slipping before the CPI release and dropped significantly to around 2.3150 after the data hit. The pair briefly recovered toward 2.3300, possibly on U.S.-Russian geopolitical jitters, but traders soon turned their focus back to the upcoming Trump-Xi meeting, sending risk assets (especially comdolls) higher. GBP/NZD ended the week near its lows, well below the watchlist’s area of interest.

GBP/USD: Very Bullish GBP Event Outcome + Risk-On Scenario

GBP/USD 1-Hour Forex Chart by TradingView

Cable’s upside breakout from a short-term double bottom pattern caught the attention of our analysts, creating a potential retest situation ahead of the U.K. CPI release. However, the actual results fell short of market estimates, invalidating the long GBP strategy. Easing U.S.-China trade jitters and a pullback in gold prices also helped USD demand later in the week.

GBP/USD slipped below the pivot point level (1.3381) and 38.2% Fibonacci support, which held as strong resistance after the inflation figures were printed, allowing the slide to extend below the lower Fib levels and onto the next floor at S1 (1.3290). The pair managed a small rebound on improved risk sentiment, but the bounce didn’t stick. GBP/USD kept its bearish tilt and finished the week near its lows.

EUR/GBP: Very Bullish GBP Event Outcome + Risk-Off Scenario

EUR/GBP 1-Hour Forex Chart by TradingView

EUR/GBP had been forming higher lows and lower highs inside a symmetrical triangle pattern, and it seemed that price was gearing up for a downside break just ahead of the target event. But when the CPI data came in weaker than expected, the pair flipped higher instead, invalidating the long GBP strategy and bouncing sharply back toward the triangle’s upper boundary.

The resistance area held at first, pushing EUR/GBP back toward the Pivot Point at 0.8687. By Thursday, though, a mid-tier Euro Area report gave the euro a lift, sending the pair past R1 (0.8710) and turning that area into new support. From there, bullish momentum built as better-than-expected Euro Area PMI data – especially out of Germany – kept the recovery story alive despite weakness in peripheral regions.

EUR/GBP approached the next resistance at R2 (.8748) before the end of the week, driven by euro strength and pound weakness.

The Verdict

Our watchlist setups were mainly leaning towards an inline or upbeat U.K. CPI print, missing out on trade ideas for a possible downside surprise. Instead, a GBP/CHF short bias emerged as arguably the most viable setup for the week, given the target event outcome and prolonged market uncertainty.

Risk sentiment proved more complex than usual, as the focus was divided between the ongoing U.S. government shutdown, tariffs tantrums between the U.S. and China, trade-related optimism, and geopolitical tensions with Russia.

In this scenario that leaned mostly risk-off, the franc appeared as the more stable counter currency to pound weakness while the traditional safe-haven U.S. dollar struggled to find clear direction while the Japanese yen was weighed by stimulus prospects.

Overall we rate our watchlist discussions as “not likely” since we did not explore net bearish GBP scenarios.

Key Takeaways:

Consider Planning for Less Likely Scenarios

Even though leading indicators and analyst projections appear to be pointing to more probable outcomes, it never hurts to have a backup plan in case the results go the least expected way, since this could actually create much bigger profit opportunities.

In this particular case, a downside U.K. CPI surprise didn’t seem likely, given pricier fuel, airfare, and the lingering effects of April’s National Insurance hike, but a weaker print strongly stoked dovish BOE expectations and triggered a sharp turnaround for sterling.

Be Quick on Your Feet When Shifting Biases

Staying on the lookout for particular technical setups based on a certain event bias doesn’t mean you completely discount the possibility of price action going the opposite way. For instance, even when you’re watching out for a possible triangle breakdown in the event of a hotter U.K. CPI print, you could still keep a potential bullish break in your back pocket in case the results come in significantly below estimates.

Counter currency Moves Can Revive Fundamentally Invalidated Setups

Just because a currency pair moves against your original bias doesn’t mean the technical setup is finished. When the counter currency’s price driver dominates, it can flip the script and make previously invalidated levels relevant again.

Take last week’s moves as an example. GBP/JPY closed above its watchlist area of interest, though mostly because of yen weakness, not pound strength. Meanwhile, EUR/GBP went in the opposite direction of the initial bias, but price still respected key technical levels like the triangle and Pivot Point resistance levels along the way.

Revisit identified areas of interest once the fundamental bias has shifted – they might come in handy for a countertrade.