GBP Collapses On Weak CPI

GBP falls 100 points as U.K. CPI data comes in lower at 2.60% YoY

Well the much-vaunted CPI data from the U.K is out, and there must be collective sighs of relief at the Bank of Englands Threadneedle Street headquarters. A 2.60 % YoY print is quite a bit lower than forecast and could take the wind out of sterlings sails for now.

The short term market, which was likely long into these numbers, certainly thinks so with GBP gapping 100 points lower from 1.3120 over the data to 1.3020. As I write this short note, GBP trades at 1.3027, a veritable dead cat bounce.

  • (UK) JUN CPI M/M: 0.0% V 0.2%E; Y/Y: 2.6% V 2.9%E
  • CPI CORE Y/Y: 2.4% V 2.6%E – CPIH Y/Y: 2.6% v 2.7%e
  • RPI M/M: 0.2% v 0.4%e; Y/Y: 3.5% v 3.6%e – RPI Ex Mortgage Interest Payments (RPIX) Y/Y: 3.8% v 3.8%e prior
  • Retail Price Index: 272.3 v 272.7e

Note: above the BOE inflation target for the 5th straight month but moved off the May reading of 2.9% which was the highest level since Jun 2013.

The data may override the U.S. Dollar negative sentiment in the short term at least. GBP has support at £1.3020 with £1.3000 being a major psychological pivot point. Below this level, we see little until the £1.2935 regions.

GBP has resistance at £1.3125, the day’s highs, with talk of £1.3300 quashed for now.

The chart below says it all, whether the GBP market has severely whipsawed itself will become clearer in the next few hours as Her Majesty’s Pound is sent to the naughty corner and all talk of rate hikes is cancelled.

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Jeffrey Halley

Jeffrey Halley

Senior Currency Analyst
Based in Singapore, Jeffrey has over 25 years experience in the financial markets, having traded currencies, options, precious metals and futures. Jeffrey started his career at Barclays Bank in New Zealand. However he has spent most of it in London and Asia.Jeffrey focuses on the Asia time zone across asset classes. A regular commentator on business news TV and Radio, he is originally from New Zealand and holds an MBA from Cass Business School, London.