BoE expected to remain hawkish despite fall in UK inflation

UK CPI Key Points:

• YouSoon UK CPI turn down9.9, aannual, under a concensus Fprediction of 10.2,,
• UK Core CPI Annual Actual 6.3% Vs forecast 6.2%,
• Tookargest Youpowered Ccontribution Came from Housing and Household Services.

CPI and Forex: How CPI Data Affect Currency Prices

The annual inflation rate in the UK surprised the downside, beating estimates. Print declined from 10.1% in July to 9.9% in August, estimated at 10.2%. The biggest contributors this month were from housing and household services (which include electricity, gas and other fuels. Transportation, food and non-alcoholic beverages are also major contributors.

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The print may have come as something of a surprise, although I don’t think the print is going to have a material impact on BOE policy going forward. With another hike in price already for the next week, the BoE will have to maintain its bullish trajectory or keep rising inflation along with the pound as a winter power cut from gas shortages. risk of. Yesterday’s employment data showed that labor shortage persists and demand has moderated slightly. An increase of interest for the Bank of England would be a wage increase, which could push it higher if the shortage continues which in turn will exacerbate the inflation crisis. The only positive coming from the job numbers was the unemployment rate, which fell to a new low of 3.6 percent, its lowest level since 1974. Thus, while this number may seem fine, unemployment appears to be declining. was driven by the increase in people classified as inactive. Workers classified as chronically ill have grown at an alarming pace, with 150,000 being added in the past two months. bank of england as in a tough spot US Federal Reserve Yesterday’s CPI is set to continue its hiking cycle after the print, while the ECB took a jumbo rate hike last week.

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market reaction

GBPUSD Daily Chart

Source: trading viewZain Vavada. drawn by

The initial reaction was relatively short and was looking for further push lower before pulling back with a 10pip spike higher for GBPUSD. Yesterday’s US CPI print reimposes dollar bulls with no upside move GBPUSD looking less likely with a giant bearish candle pointing forward and down. We rallied towards the resistance zone at 1.17500 on Monday and yesterday as the CPI news broke and has since registered a decline with YTD lower. We currently do business under 20,50 and 100-SMA In the pound and with a downward sloping shield supporting the weakness. Should we target YTD at 1.12000 onwards, should we remove the rest? 2.618 Fib Level at around 1.0900.

Key Intraday Levels to Watch,

support area

resistance zone

— Written by Zain Vavada for DailyFX.com

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