British pound yawns as CPI matches estimate

UK inflation nudged higher in May, as was expected. The headline release rose to 9.1% YoY, up slightly from the 9.0% gain in April. On a monthly basis, CPI nudged higher to 0.7%, up from 0.6% in April.

UK inflation nudges higher

The fact that UK inflation accelerated and an inflation peak remains elusive is not positive news. Still, the 9.1% reading matched the estimate and the market reaction has been muted. The ball is in the court of the Bank of England, but the trouble is that Bailey & Co. appear to have raised the white flag in response to the inflation onslaught. The BoE is projecting that inflation will peak above 11%(!) later in 2022, which is cold comfort for Britons who are grappling with a serious cost of living crisis. Inflation expectations are rising, and if these become unanchored, it will be a mammoth task for the government and the BoE to get expectations back into the box. There is a wave of discontent among workers and this week’s paralysing rail strike could be just the start of major labour unrest. Consumer confidence is understandably down, and if this translates into less consumer spending, the economic woes will only compound.

With no US releases today, investors will be directing their full attention at what Fed Chair Powell has to say on Capitol Hill. The markets will be looking for clues on the direction of monetary policy and the tone of Powell’s testimony will be doubly important to jittery markets which are becoming more concerned about a recession by the day. Powell’s appearance could shake up the currency markets, which are having a quiet day.

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GBP/USD Technical

  • GBP/USD tested support at 1.2187 earlier in the day. Next, there is support at 1.1969
  •  There is resistance at 1.2441 and 1.2659

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.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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