Inflation in the UK rose for the second consecutive month in June, although it remained fairly close to the Bank of England's 2% target. However, ongoing price pressures in the services sector have raised doubts about whether the central bank will lower interest rates next month.

According to the data, the consumer price index increased by 2% in June compared to the previous year, maintaining the same pace as the previous month. The Office for National Statistics also reported that monthly inflation rose by 0.1%, contrary to economists' expectations.

Service price inflation, which the central bank monitors more closely, stood at 5.7%, higher than the 5.1% expected by the Bank of England. These figures may heighten the regulator's concerns that inflation, although back to the target level, may not remain there for long. This is likely to be a major obstacle for officials hoping to start a rate-cutting cycle in August this year.

Against this backdrop, traders have revised their expectations for an interest rate cut next month. Now, this probability is estimated at 25%, compared to over 40% yesterday. The British pound also rose, now heading towards its annual high, ready to surpass it.

Regarding the breakdown of the indicators, prices in restaurants and hotels rose by 6.3% year-on-year. The annual growth was almost entirely driven by hotel room prices, which rose by 8.8% month-on-month, according to the ONS.

Food price inflation decreased, providing households with some relief. Food and non-alcoholic beverage prices rose by only 1.5%, the lowest level since October 2021. This indicator has been decreasing for 15 consecutive months from a peak of 19.2% in March 2023 – the highest annual rate in the last 45 years.

Tomorrow, a series of employment data will be released, providing additional information about core inflationary pressures in the labor market. Economists expect wage growth to fall below 6% for the first time in 20 months. Although this is still much higher than what the Bank of England would consider comfortable, the decline may boost confidence that the Bank of England will indeed cut interest rates, helping to support economic growth.

As for the current technical picture of GBP/USD, pound buyers need to take the nearest resistance at 1.2985. Only this will allow targeting 1.3010, above which it will be quite problematic to break through. The furthest target will be the area of 1.3030, after which a sharper rise of the pound to 1.3070 can be discussed. In case of a pair's decline, bears will try to take control of 1.2945. If successful, breaking this range will deal a serious blow to the bulls' positions and push GBP/USD to a low of 1.2900, with the prospect of reaching 1.2870.

As for the current technical picture of EUR/USD, buyers now need to consider how to take the 1.0920 level. Only this will allow targeting a test of 1.0940. From there, it is possible to climb to 1.0960, but doing so without the support of major players will be quite challenging. The furthest target will be the 1.0980 maximum. In case of a decline in the trading instrument, I expect any significant actions from major buyers to be around 1.0885. If no one is there, it would be good to wait for a minimum update at 1.0865 or to open long positions from 1.0840.