UK inflation data inline; Pound remains near 2-year low

9:06 AM 17 July 2019

Summary:

  • UK CPI Y/Y: +2.0% vs +2.0% exp. +2.0% prior

  • GBPUSD earlier dipped to lowest since March 2017

  • Brexit concerns continue to weigh

 

The latest UK inflation figures have matched expectations with both the headline and core CPI readings in year-on-year terms coming in inline with consensus forecasts. The headline Y/Y rose at 2.0% with the core reading at 1.8%. This means the headline inflation metric remains at the Bank of England’s threshold of 2.0%, but Governor Carney and his fellow rate-setters are unlikely to place too great a weight on this with economic data still very much of secondary importance given that Brexit uncertainty continues to loom large.  

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UK inflation remained flat in both the headline and core terms in the month of June. The headline is at the BoE’s inflation target but given political uncertainty a rate hike anytime soon still seems an unlikely prospect. Source: XTB Macrobond 

 

The pound earlier dropped to its lowest level since March 2017 as it dipped below the $1.24 handle against the US dollar and the currency continues to be pressured by Brexit-related concerns. Remarks that Boris Johnson, the clear favourite to be announced as the next PM within a week, is willing to use unorthodox strategies in an attempt to bypass parliament and force through a no-deal by October 31st have done little to help the pound’s plight and while this scenario remains unlikely, its represents a significant tail-risk for sterling. 

 

With so much pessimism around at present there is a feeling that we may be getting a little  extreme on the negative side and it would not be at all surprising if there’s a bounce in the not too distant future. A kind of sell-the-rumour-buy-the-fact move may well play out, possibly coinciding with the new PM moving into number 10 and creating a Boris-bottom for the pound!  

GBPUSD has dropped to its lowest level since March 2017 this morning and trades just a few percent above the post Brexit vote low around $1.20. Source: xStation  

 

 

 

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