Prices are rising at an accelerated pace in the UK: is this a result of Brexit? Or just a small divergence on expectations? CPI rises 0.5% y/y and core CPI at 1.4%. Month over month, prices rose 0.2%, exactly as expected. The Retail Price Index (RPI) also beat with 1.6% y/y instead of 1.4% expected. PPI Input came out at 1.8%, double the expectations of 0.9%.
GBP/USD extends its recovery above 1.32.
The UK was expected to report a rise of 0.4% in prices year over year in June after 0.3% in May. Core CPI was expected to rise 1.3% after 1.2% seen in May. The historic EU Referendum happened towards the end of the month and any rise in prices related to pound weakness will probably only be seen later on.
GBP/USD was trading lower ahead of the publication, pushed by the general “risk off” sentiment grappling markets.
In the UK, the new PM Theresa May is presiding her first cabinet meeting with Brexit topping the agenda. Moody’s has lowered the country’s GDP forecast. We will get the first estimate of growth for Q2 next week.
Yesterday, BOE member Martin Weale did not seem in a rush to cut rates. This helped push the pound higher. However, it is important to remember that Weale is a hawk. The next meeting of the BOE is held on August 4th. At this time, the Bank will also release its Quarterly Inflation Report and they are expected to issue further stimulus.
Next on the agenda we have business confidence from Germany’s ZEW institute. This could better reflect Brexit ramifications.
Support awaits at 1.3120, followed by the very round 1.30. Resistance is at 1.3350. Here is the 30 minute chart:
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