The UK was expected to report CPI inflation of 0.1% y/y in December, unchanged from the previous month. Core CPI was predicted to remain unchanged at 1.2%. The actual results are +0.2% in the headline number and 1.4% in core inflation, raising the chances of a rate hike still in 2016. The Retail Price Index is up 1.2% y/y, also beating estimations.
Update: that didn’t last too long: Carney Marks Down GBP/USD to 2009 levels
GBP/USD traded around 1.14320 before the publication rising from previous lows, but managed to extend the gains reaching 1.4340.
Month over month, CPI is up 0.1%, better than 0% expected. Core is up 0.3% m/m against 0.1%. The year over year figures grab more attention. Also the RPI is better than predicted with 0.3% m/m against 0.2% initially estimated.
The HPI stabilized with a rise of 7.7% y/y after quite a few slides. PPI data also came out better than expected with -0.8% m/m instead of a bigger drop of 1.7% that was on the cards.
Will this cheer the Bank of England? Governor Mark Carney will make a public appearance quite soon: at 11:00 GMT. He will have the chance to comment on inflation and perhaps provide hints about the employment and wage report tomorrow, as well as the path for future rate hikes, which seems quite elusive at the moment.
Here is the GBP/USD chart. It seems that the market was front running a better than expected figure, perhaps via a leak. Or, you could see the upwards move as part of the of “risk off” environment that took hold after the not-so-terrible Chinese data.
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