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17/07/24
85
GBP At One-Year High as CPI In UK Stays At 2%
On Wednesday, the British pound was higher for the 6th consecutive day and GBP/USD traded at about 1.3038, up 0.51% for the day in the European session. The pound has done well in July and climbed 3%, hitting the highest level since July last year.
In July, UK consumer inflation was the same as in June and stayed at 2% y/y. Although that was more than the market consensus of 1.9%, it’s difficult to complain when inflation is at the BoE’s target of 2% for two straight months. Inflation dropped to 0.1% monthly, down from June’s 0.3%, and the same as the market consensus.
Core inflation was 3.5% higher y/y, the same as in June and the market estimate. Core inflation dropped to 0.2% from 0.5% monthly, lower than the 0.1% market estimate.
The pound responded to the positive inflation report and extended the impressive July rally. The grim note was services inflation, which the Bank of England monitors closely for indications of domestic inflationary pressure. In July, services inflation was unchanged at 5.7%.
A concern for BoE policymakers is that services inflation is nearly triple the 2% target. The cash rate has been at 5.25% since August 2023 when inflation was at 7.9%.
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