– U.K. Consumer Price Index (CPI) to Uptick for Third-Consecutive Month.
– Core Inflation to Rebound to Annualized 1.4% Following the Unexpected Slowdown in July.
Trading the News: U.K. Consumer Price Index (CPI)
A pickup in both the headline and core U.K. Consumer Price Index (CPI) may encourage a larger recovery inGBP/USD as the Bank of England (BoE) faces a greater threat of overshooting the 2% target for inflation.
What’s Expected:
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Why Is This Event Important:
The BoE looks poised to further embark on its easing cycle as ‘a majority of members expect to support a further cut in Bank Rate to its effective lower bound,’ but it seems as though Governor Mark Carney will continue to rule out a zero-interest rate policy (NIRP) for the U.K. as the central bank ‘expects that by the three-year forecast horizon unemployment will have begun to fall back and that much of the economy’s spare capacity will have been re-absorbed, while inflation will be a little above the 2% target.’
Expectations: Bullish Argument/Scenario
Release
Expected
Actual
M3 Money Supply ex. IOFC (3M) (Annualized) JUL)
7.1%
14.7%
Retail Sales ex. Auto Fuel (MoM) (JUL)
0.3%
1.5%
Average Weekly Earnings ex. Bonus (3MoY) (JUN)
2.3%
2.3%
The expanding money supply accompanied by the pickup in household earnings may boost U.K. price growth, and signs of stronger-than-expected inflation may trigger a bullish reaction in the sterling as it limits the Monetary Policy Committee’s (MPC) scope to further support the real economy.
Risk: Bearish Argument/Scenario
Release
Expected
Actual
NISER GDP Estimate (AUG)
—
0.3%
BRC Shop Price Index (YoY) (AUG)
—
-2.0%
Llyods Business Barometer (AUG)
—
16
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