– U.K. Consumer Price Index (CPI) to Rise Annualized 1.1% (Highest Reading Since October 2014).
– Core Rate of Inflation to Rebound to Annualized 1.3% in November.
Trading the News: U.K. Consumer Price Index (CPI)
A rebound in the U.K. Consumer Price Index (CPI) may fuel a larger GBP/USD relief rally ahead of the Bank of England’s (BoE) last interest rate decision for 2016 as heightening price pressures dampen speculation for additional monetary support.
What’s Expected:
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Why Is This Event Important:
Evidence of stronger price growth may push the BoE to adopt a more hawkish tone ahead of 2017 as Governor Mark Carney and Co. continue to warn ‘there are limits to the extent to which above-target inflation can be tolerated,’ and the central bank may gradually move away from its easing-cycle over the coming months as officials warn ‘monetary policy can respond, in either direction, to changes to the economic outlook as they unfold to ensure a sustainable return of inflation to the 2% target.’ However, another slowdown in the CPI may curb the recent recovery in GBP/USD, and the Monetary Policy Committee (MPC) may have little choice but to further insulate the real economy as the U.K. prepare to depart from the European Union (EU).
Expectations: Bullish Argument/Scenario
Release
Expected
Actual
Net Consumer Credit (OCT)
1.5B
1.6B
Retail Sales ex Auto Fuel (MoM) (OCT)
0.4%
2.0%
Average Weekly Earnings ex. Bonus (3MoY) (SEP)
2.4%
2.4%
Higher wages accompanied by the pickup in private-sector spending may encourage U.K. firms to raise consumer prices, and a marked rebound in the headline and core rate of inflation may trigger a bullish reaction in the sterling as it boosts interest-rate expectations.
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