UK inflation beats with 2.7% – GBP spikes


Inflation is picking up steam in the UK. Headline inflation jumped to 2.7%, above 2.6% expected. And this is not limited to not volatile prices: core CPI is up 2.4% y/y, also above expectations. The RPI rises at an annual rate of 3.5%.

The only miss comes from the House Price Index which slows to 4.1%. All in all, the rise of inflation erodes the standard of living in Britain.

Pound/dollar was already advancing ahead of the publication and reached a high at 1.2957 before retreating back down to 1.2930. The pound always seems hesitant when approaching the 1.30 level.

The state of the pound

The UK was expected to report a bump up in inflation: 2.6% on the headline number in April after 2.3% in March. The Retail Price Index was predicted to rise by 3.4% y/y after 3.1%. Core CPI was projected to advance by 2.2% after 1.8%.

GBP/USD traded around 1.2930 ahead of the publication, maintaining the well-known range. Cable remains shy of the 1.30 level.

Last week, the BOE was relatively dovish. Despite unfounded optimism for a smooth Brexit process, Carney and co. see negative real wages this year and inflation peaking at the end of the year. On this background, it is hard to see sterling advancing.

Today’s inflation report is followed by the jobs report and retail sales numbers. All are the last top-tier figures ahead of the elections on June 8th, the announcement of which sent the pound to its current levels.

Here is the daily chart showing the recent moves in pound/dollar.

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

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