Following a drop last month UK inflation is back on the upside, with today’s figures pointing to a new appreciation. Sterling surged following the release and forex trading activity should be strong in the following hours.
Consumer Price Index YoY reaches 2.9%
Looking at our chart below, representing the CPI on a yearly basis, shows how to number reached again at the 2.9% mark in August.
Source: www.fxstreet.com
There had been other inflation figures released at the same time and all pointed towards a better-than-expected outcome. Retail Price Index YoY advanced to 3.9%, with an initial forecast of 3.7%, Producer Price Index YoY advanced to 3.4% after an expected figure of 3.1%. MoM figures had also came out better than expected favoring the forex trading activity around the pound pairs.
Now that the inflation shows a new uptick, the attention will go toward this week’s BOE meeting. The market will surely watch if additional members will consider that recent inflation developments could require a rate hike. Although the possibility of a rate hike any time soon is very unlikely, due to uncertainty around Brexit, any positive sign in that direction could spark further sterling gains.
So far, cable had been moving upwards and broke above last month’s high of around 1.3266. Further gains are expected in the near future since the US dollar had not been in a good position. Pound-yen or GBPJPY also surged on the upside and the bullish trend could be helped by the recent weakness of the yen, generated by diminishing political tensions between the US and North Korea.
To sum up, the sterling might continue to profit short-term due to positive inflation numbers that were just released, and in case the BOE will show again concerns over current figures, the odds of a rake hike could rise again.
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