Britain’s inflation accelerated significantly and leaves less room for wait regarding the rate hike. The 4.4% annual price rise sends GBP/USD higher.
The consumer price index (CPI) in the UK was expected to rise from an annual rate of 4% reported last month to 4.2%. CPI, already above the government’s 1-3% range in the past year or so, jumped even higher, to 4.4%.
GBP/USD is already at 1.6363. It’s noteworthy that cable jumped before the release. The data was probably leaked.
The governor of the central bank, Mervyn King, usually insists (and with reason) that inflation is a result of external pressures, mostly oil and food prices that have risen significantly and are pushing inflation higher. He claimed that it’s not local demand.
Now we see that also Core CPI rose at an annual rate of 3.4%, also above target and also beyond expectations for a rise of 3.2%. It looks like the rate hike will come very soon, perhaps in April, together with the European rate hike.
Another inflation indicator, RPI (Retail Price Index) is sometimes considered a better reflection of what customers really feel. And also here, it jumped from 5.1% to 5.5% and exceeded expectations for a rise of 5.2%.
GBP/USD looks to next resistance
After securing the 1.6280 – 1.63 region that capped the pair for a very long time, GBP/USD is moving higher. The next resistance line is found at 1.6450, which was a peak in January 2010. The pound is currently at a 14 month high. Above this line, more resistance is found at 1.6580, followed by the strong 1.67.
In case of reversal, 1.63 now turns into support, followed by 1.6110 to 1.60, the lines that characterized its trading in recent months, before the current leap.
For more events and technical levels, see the GBP/USD Forecast.
In other British data, public sector net borrowing showed a higher deficit than expected: 10.3 billion, compared to 6.3 billion that was estimated. This follows an impressing surplus reported last month – 6.3 billion. This is an upwards revision from 5.3 earlier reported.
This high deficit will have an impact on another big event in Britain this week – the annual budget release. This is also covered in the British pound outlook.Get the 5 most predictable currency pairs