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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