The consumer price index in the UK rose by 2.9% on an annual level. It was expected to rise from 2.7% to 3%. This miss means that Carney will not write a letter explaining inflation. And, it raises the chances of monetary easing. Core CPI advanced from 2.2% to 2.3%, the Retail Price Index (RPI) moved from 3.1% to 3.3%, all as expected.
GBP/USD traded around 1.51 prior to the publication. It made a move above 1.5140 but returned to the previous range. It is now extending its falls and dipping below 1.5050.
PPI Input surprised to the upside by rising 0.2% instead of falling by the same scale. PPI Output rose by 0.1% as expected.
This publication is important as higher inflation limits the ability of the new governor Mark Carney to act. An inflation level of over 3% requires the BOE to send an official open letter to the Chancellor of the Exchequer, in which the governor explains the reasons for the high inflation, and in which he explains what he plans to do with it. This would be very closely watched.
1.50 serves as support and 1.52 as resistance. For more levels, events and analysis can be found in the GBP to USD forecast.
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