UK CPI Price July Preview: Weaker than expected inflation toweigh on the sterling

Consumer prices in the UK are predicted to continue their slow recovery in July from their pandemic slide.  The GBP/USD surge above 1.3000 may require a dose of price optimism for retention as the sterling will need to get stronger on its own after the USD has stopped its slide awaiting August developments, FXStreet’s analyst Joseph Trevisani informs.

Key quotes

“Overall inflation is forecast to drop 0.1% on the month in July following June’s 0.1% increase. Annual inflation is expected to be unchanged at 0.6% in July while core annual CPI is projected to slip to 1.3% in July from 1.4% prior.”

“If inflation continues low or falls the currency market will begin to speculate that the Bank of England (BoE) could, after all, cut its base rate below zero.  Stronger than forecast price data will reduce the risk of the BoE joining the European Central Bank (ECB) and many EU national banks with negative main rates.”

“The pound has benefited from the general dollar weakness of the past month which was based on the supposed impact of the second wave of the coronavirus on the US economy.  That slowdown has been minimal though the markets are waiting for confirmation.  The dollar decline has halted awaiting August developments in the US. If the sterling is to keep its edge, it will soon have to do so on its own.”