Higher than expected inflation in the UK. Month over month CPI rises by 0.7%, pushing the year over year CPI to 2.3%. Core CPI is up to 2%. All the numbers are 0.2% above predictions.
GBP extends its gains: GBP/USD breaks resistance at 1.2420 and reaches a new high of 1.2460.
The Retail Price Index also beats expectations with 3.2% y/y against 2.9% that was forecast. PPI Input missed with -0.4% m/m and PPI Output missed with 0.2%. The producer price number may imply cooler inflation down the line. Nevertheless, the consumer price beats push the pound higher.
The UK was expected to report a rise of 0.5% m/m and an acceleration of the y/y price rise to 2.1% in February from 1.8% in January. Core CPI carried projections for an increase from 1.6% to 1.8%. See the preview: trading the UK CPI with GBP/USD.
GBP/USD was trading higher towards the publication, topping 1.24 and reaching 1.2413. Leaks are not uncommon when it comes to UK events.
Brexit sent the pound tumbling down. The weak exchange rate has resulted in higher prices for consumers and this is already hurting consumption. While the Bank of England would like to see a stronger pound and consequent lower inflation, they are reluctant to raise rates. In the recent rate decision, one member voted for a rate hike. Other members were also expressing their worries about the situation.
Yesterday we learned that Brexit has a date: March 29th. The UK government is set to formally announce the triggering of Article 50, setting the clock ticking towards the end of the EU membership within two years. Negotiations are set to begin later this year.
Here is the pound/dollar chart.
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