The positive UK inflation data remains secondary to the recent trend of softer US data which has prompted the futures market to bring forward expectations of interest rate cuts in 2024, sending the dollar lower. The daily GBP/ USD chart reveals the effect of yesterday's US CPI print, sending cable nearly 2% higher on the day and above the 200-day simple moving average (SMA). Source: TradingView, prepared by Richard Snow The better-than-expected move in UK inflation this morning threatens to eat into those gains but thus far the effect has been minuscule. The immediate market reactions was relatively tame in the moments that followed the release with yesterday's lower US CPI having propelled cable higher on the day. Source: Refinitiv, prepared by Richard Snow Immediate Market Reaction UK Inflation Makes Positive Strides Towards 2% Goal These areas have previously been identified by the BoE as areas to focus on but more recently average earnings have received less attention. The latest move solidifies the notion that the Bank of England is done hiking interest rates but inflation, average earnings and services inflation still remain elevated. Rishi Sunak promised the UK public that his government would halve inflation by the end of 2023. The massive 12-month decline in headline inflation is notable on the chart below and will no doubt be lauded by the UK government ahead of next week’s Autumn (budget) Statement.
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