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Consumer Price in the UK fell to 2.8%. Expectations were for no change at 3% – the top border of the 1-3% target. Also other inflation indicators fell below expectations.

This may be good news for the British consumer, but for the pound it means a drop:

GBP/USD is now at 1.5635 after falling as low as 1.5621. It was capped by the round 1.57 line earlier in the day.

On a monthly basis, CPI for May dropped by 0.1%. The slide in oil prices during this month had its contribution. The annual rate of 2.8% is the lowest since the end of 2009.

Inflation was above target for a long time, and the central bank didn’t really act – as it was pushed by commodity prices. Despite more QE in recent months, inflation fell into range.

The Retail Price Index (RPI) stands at 3.1%, lower than last month’s 3.5% and also below expectations that stood on 3.1%. Core CPI rose from 2.1% to 2.2%, but was also short of predictions for 2.3%.

For more on the pound, see the Pound USD forecast.

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