The UK's Office for National Statistics (ONS) is set to release the August CPI on Wednesday, with inflation remaining a key indicator that the Bank of England (BoE) will use to determine monetary policy, directly impacting the pound sterling.

In addition, at the August meeting, the Bank of England decided to cut interest rates by another 25 basis points (bps), bringing them down to 5%. This is because high interest rates impact production costs and prices of various goods, which will negatively affect GDP in the coming quarters.

Meanwhile, the BoE has forecasted that inflation will decrease to 2.7% over the next 12 months, the lowest level in three years. However, the 5-year outlook slightly increased to 3.2% from 3.1%.

Source: Fxstreet