London stocks mixed as UK inflation cools sterling and boosts Fed cut bets

London stocks were mixed on Saturday as easing UK inflation figures weighed on sterling, while Asian equities followed Wall Street’s rise on growing bets of imminent Federal Reserve rate cuts. The FTSE 100 slipped 0.3% by mid-morning in London, with energy and consumer staples lagging as the pound fell 0.4% against the dollar to $1.2645 . The broader FTSE 250 edged 0.1% higher, reflecting uneven sector performance after official data showed annual UK inflation cooled to 2.8% in May from 3.2% in April, undershooting the Bank of England’s 3% target for the first time since mid-2021.

The inflation print, released on Friday, reinforced market expectations that the BoE may accelerate its easing cycle, with traders pricing a 60% chance of a quarter-point rate cut at the August policy meeting, up from 45% a week ago . “The disinflation trend is now undeniable,” said Sarah Hewitt, senior economist at Investec in London. “But the BoE will want to see sustained progress before acting decisively.” Sterling’s decline mirrored the shift, with the currency also losing ground to the euro, where it traded at €1.1680, down 0.2% on the day.

Across Asia, equities took their cue from Wall Street’s overnight advance, which was driven by renewed optimism over US rate reductions. Japan’s Nikkei 225 rose 1.1%, South Korea’s Kospi gained 0.8%, and Hong Kong’s Hang Seng added 0.7%, as investors bet that softer US inflation data later this month could pave the way for Fed easing in September . European futures pointed to a cautious open, with the Euro Stoxx 50 up 0.2% ahead of the cash market open.

The sterling’s softness came amid broader scrutiny of the UK’s economic policies. A report in *London Loves Business* highlighted a Polish government advisory urging citizens to “maximise benefits” in Britain before returning home, describing the UK as a “laughing stock” over its welfare system . The article, citing a Polish social media campaign, sparked debate over immigration and welfare costs, though the UK government has not publicly responded. Analysts cautioned against overinterpreting the report, noting that anecdotal claims often distort broader economic narratives.

With UK inflation now below the BoE’s target and global risk appetite firming, investors are closely watching next week’s US PCE inflation data for further clues on central bank policy. “The stars are aligning for a dovish pivot,” said Hewitt, “but the BoE will not rush into a decision that could reignite price pressures.” For now, sterling remains under pressure, while equities navigate a delicate balance between domestic data and international sentiment.