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No  surprise at the headline number: Britain is still not in deflation. Other numbers are less impressive: core CPI dropped from 1.2% to 1%. The RPI also fell short of expectations with a tick down to 0.9% y/y.

GBP/USD slides to 1.4625 on the other figures.

The data.

  • CPI: 0% as expected.
  • Core CPI: 1% against +1.2% expected.
  • RPI: +0.2% m/m, +0.9% y/y
  • PPI Input +0.3% m/m,
  • PPI Output +0.2%  m/m,  -1.7% y/y.
  • HPI 7.2% against 8.7% expected.

While producer prices beat expectations, house prices fell short. More importantly, the retail price index and core inflation both disappoint. This is why the pound is down.

The UK was expected to report a second consecutive month of 0% change in prices year over. There was some fear of deflation as well. Core CPI was predicted to remain unchanged at 1.2% and the Retail Price Index (RPI) to stand at 1%.

GBP/USD was under a lot of pressure in recent days, and it traded around 1.4640 towards the publication.

Here is the preview: trading the UK CPI with GBPUSD.

The low so far in this cycle has been 1.4565. These levels were last seen in 2010.

The clock is ticking towards the May 7th elections. While opinion polls continue showing a stalemate between the two largest parties with no absolute majority, the recent strengthening of the SNP in Scotland could imply a Labour-SNP coalition, which seems like the worst outcome for the markets.