Wednesday, July 18, 2018

UK Inflation Data Disappoints

Tags
  • Pound
  • FTSE 100
  • UK Inflation

Sterling's drop deepens as inflation data from the U.K disappoints. The year on year CPI figure printed at 2.4% change relative to the expected 2.6% change. The CPI's failure to rise and meet expectations is in line with yesterday's U.K wage growth number. Yesterday's drop in wage growth and today's weak inflation report means that the BoE might end their plan for a rate hike this August. The money market has already started pricing in a lower chance of a rate hike with the probability dropping from 90.7% on Monday to 77.6% following the inflation report.

Moreover, Governor Carney showed pessimism yesterday when he appeared in front of the parliament. He was already concerned with the politics surrounding Brexit and the series of weak economic data, which will only add hesitation in regards to a rate hike.

Following the report, the Pound broke below the first support level at 1.3090 and fell 60 pips towards the next support level at 1.3030. As investors continue to digest the news, expectations point towards a break below the second support level (1.3030) exposing the 1.29470.

As for the FTSE 100, the inflation report had no effect on the index due to the fact that equity markets in general are being driven by the global trade war rhetoric.
 

 
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