UK inflation rose to an annual level of 1.8%, more than expected. The level of the Consumer Price Index was expected to rise from 1.6% to 1.7% (annualized). Core CPI also came strong at 2%, above 1.8% expected. The Retail Price Index (RPI), disappointed by remaining unchanged at 2.5%. Producer prices actually fell below expectations, but they carry less weight. The headline figure is what matters.
GBP/USD was moving up, trading around 1.6840 towards the release. After an attempt to break above 1.6860, the pair is now falling. Is this yet another case of “buy the rumor, sell the fact”?
The pair is now down back to the recent range of 1.680 – 1.6840. It seems like this mini surprise was already priced in.
Talks about the crisis being over are increasing in the UK, and stronger inflation could push the BOE to hike the rates early in 2015.
The pound has been recovering from the big fall that it suffered after a failed attempt to break the round 1.70 level. The round 1.58 line provides some support, while 1.6880 works as temporary resistance.
For more levels, see the GBPUSD prediction.