UK inflation, or CPI (Consumer Price Index) was released yesterday and contracted 0.1% MoM. This meant that YoY inflation fell from 4.5% to 4.2%, although this is well above the Bank of England’s 2% target inflation was expected to hold steady and this has meant that an interest rate hike in the UK now seems even further off. On top of this there have been numerous different predictions on Q2 GDP figures for the UK, none of which have come in higher than 0.2% which does little to suggest otherwise.
There is almost a sense of deja-vu in the markets as at the start of 2010 there was speculation of when we will raise rates that year, something that failed to come to fruition. This has been repeated again this year, leaving a sour taste in the mouth for anyone looking to sell Sterling, the UK were heavily tipped to raise rates before Europe, who have now pushed their base rates up a quarter of percent twice already this year.
UK Unemployment figures are likely to dictate GBP/EUR today, although these are expected by the market to remain stagnant I personally would not be surprised to see a small rise in the rate which could lead to some GBP weakness this morning. Interestingly the Euro has gained nearly half a percent already today, which could be market sentiment pricing a possible unemployment rise into the market.
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