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22/05/24
229
GBP Ignores Higher Than Expected UK Inflation
On Wednesday, the British pound inched but has trimmed most of those gains. GBP/USD traded at about 1.2703, 0.06% higher in the North American session.
In April, UK inflation fell sharply to 2.3% y/y. This was lower than March’s 3.2% and the lowest rate since July 2021. It was however higher than the market forecast of 2.1%. Inflation fell to 0.3% on a monthly basis, down from March’s 0.6% and slightly higher than the market forecast of 0.2%.
Food prices dropped while services inflation and higher gasoline prices put upward pressure on the CPI.
Core CPI dropped from 4.2% in March to 3.9% y/y but was higher than the market consensus of 3.6%. The monthly reading gain of 0.9% was higher than the gain of 0.6% in March and also higher than the market consensus of 0.7%.
Although the inflation report was generally positive, the increase in April’s core CPI dampened investors’ expectations for a June rate cut. The markets have decreased the pricing of a rate cut in June to only 18%, versus Tuesday’s 50%.
The Bank of England has made fighting inflation its top priority and the inflation rate is now getting close to the 2% target, after in October 2022 reaching a high of 11.2%.
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