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.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst - Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia and the New York Times. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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