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UK CPI stands at 1.7%, as expected. Positive surprises did come from the RPI, which rose to 2.7%, core CPI, which rose to 1.7% and the HPI which jumped to 6.8%. The headline Consumer Price Index was expected to drop to 1.7% in February from an annual level of 1.9% recorded in January. The Retail Price Index (RPI) was predicted to slide from 2.8% to 2.6%. Core CPI was forecast to remain unchanged at 1.6% and the HPI to rise from 5.5% to 5.7%.

GBP/USD traded just under the 1.65 level towards the publication, still licking its wounds from the previous week’s Fed decision. Cable is now above 1.65.  All in all, the headline figure came out as expected and the other numbers helped the pair make a small recovery.

Shortcomings were seen in producer prices: PPI input fell by 0. month over month, while it was expected to rise at the same scale. PPI Output remained flat and did not rise 0.2% as predicted. A separate release of the  BBA Mortgage Approvals joined the disappointments camp with a slide from 49.3K to 47.6K.

The lower inflation gives breathing space for the Bank of England. Strong growth and a rapid drop of the unemployment rate towards the 7% threshold (7.2% in the latest read) raised expectations for a rate hike. However, the slowdown in inflation, the BOE’s prime mandate, gives space. A rate hike in Q2 2015 is on the cards now.

Resistance appears at 1.6550, followed by 1.6620. Support awaits at 1.6450. For more, see the GBPUSD forecast.