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

10:06 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.  

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  

 

 

 

Share:
Back

Join over 1 600 000 XTB Group Clients from around the world

The financial instruments we offer, especially CFDs, can be highly risky. Fractional Shares (FS) is an acquired from XTB fiduciary right to fractional parts of stocks and ETFs. FS are not a separate financial instrument. The limited corporate rights are associated with FS.
This page was not created for investors residing in Brazil. This brokerage is not authorized by the Comissão de Valores Mobiliários (CVM) or the Brazilian Central Bank (BCB). The content of this page should not be characterized as an investment offer in Brazil or for investors residing in that country.
Losses can exceed deposits