Inflation in the UK is slightly cooler than markets had anticipated. Prices dropped by 0.5% m-m as projected, but the y/y numbers are a miss. CPI is up 1.8% and core CPI remained stuck at 1.6%. Clothing store discounts are cited as the main reason for the weaker data.
GBP/USD, which was already sliding, extended the falls and hit a new low of 1.2483. Update: the pair extends its falls to a new low of 1.2458.
Here is how it looks on the Sterling/dollar chart:
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- RPI is up 2.6%, below 2.8% expected and 2.5% last time.
- PPI Input is up 1.7%, above 1% expected and below 2.7% seen last time. PPI Output is up 0.6%.
- The House Price Index is up 7.2%, above 6.9% expected.
The United Kingdom was expected to report another rise in inflation. Headline CPI was expected to rise from 1.6% to 1.9% y/y in January 2017. Core inflation was predicted to rise from 1.6% to 1.8%.
GBP/USD was trading around 1.2520, down from a peak of 1.2548 earlier in the day. Front-running a release is quite common when it comes to UK publications. Are markets anticipating a somewhat weaker outcome?
The BOE would like to see lower inflation but would not want to raise rates to make it happen. Carney and co. would like to remain neutral.
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