UK Inflation Drops
The British Pound has come under fresh selling pressure today following a weaker-than-forecast set of inflation figures this morning. Headline UK CPI was seen cooling to 2.8%, annually, last month, down from 3% prior (and expected). Similarly, core CPI was seen cooling to 3.5% from 3.7% prior, below the 3.6% the market was looking for.
BOE Notes Risks in Outlook
While still well above the bank’s 2% target, the decline in inflation will no doubt be cheered by the BOE. The central bank kept rates on hold last week while warning that risks to the economy were growing amidst an uptick in global trade tensions. Alongside rising geopolitical uncertainties, the BOE noted that there is plenty of risk in its outlook, reflected in lower growth forecasts over the target horizon.
Easing Expectations
On rates, the BOE warned that it would respond to developing data and the path of the economy. Its expected path is for the “gradual and careful” removal of monetary policy restraint (further cutting) though this would depend on data. Indeed, the BOE noted risks that inflation could rise again this year as a result of trade and geopolitical risks but should peak around Q3. A fresh dip in inflation here raises some questions and if we see a follow-up decline in the next reading, the BOE is likely to turn more dovish, driving GBP lower.
Technical Views
GBPUSD
The rally in GBPUSD has stalled for now into a test of the 1.3017 level with the market since correcting a little lower. While still within the bull channel that has framed the recovery off YTD lows, and while above the longer-term bull trend line, focus is on a continued push higher and a breakout towards 1.3264 with 1.2685 the key support to monitor.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.