UK inflation softened in April, with the annual inflation rate falling below 10%. However, food & non-alcoholic beverage prices and core inflation will concern the BoE.
It is a busy day on the UK economic calendar. This morning, UK inflation garnered plenty of interest. In April, sticky inflation figures raised the prospect of further Bank of England interest rate hikes. Inflation needed to soften significantly to ease pressure on the BoE and ease the threat of a BoE-induced UK economic recession.
The UK annual inflation rate softened from 10.1% to 8.7 in April versus a forecasted 8.3%, while core inflation accelerated from 6.2% to 6.8%. Economists forecast core inflation to hold steady at 6.2%.
According to the Office for National Statistics,
While headline inflation softened in April, food & non-alcohol beverage price inflation and core inflation will draw the attention of the Bank of England.
Ahead of the UK CPI Report, the GBP/USD fell to an early low of $1.24086 before rising to a pre-stat high of $1.24393.
However, in response to the inflation numbers, the GBP/USD slipped to a post-stat low of 1.24354 before surging to a high of $1.24678.
This morning, the GBP/USD was up 0.27% to $1.24481.
With UK inflation in focus, investors should also monitor BoE commentary. Bank of England Governor Andrew Bailey is on the calendar to speak today. Governor Bailey will deliver a keynote speech at the Mansion House Net Zero Delivery Summit before a fireside chat at the Wall Street Journal CEO Council Summit ‘Inflation and the economy.’
Looking ahead to the US session, it is a quiet day on the US economic calendar. There are no US economic indicators for investors to consider.
However, the FOMC meeting minutes will draw interest late in the US session with US debt ceiling-related news and US Treasury Secretary Janet Yellen also in focus.
According to the CME FedWatch Tool, the probability of a 25-basis point Fed interest rate hike in June stood at 28.1%, up from 25.7% on Monday.
Progress towards a debt ceiling deal and hawkish FOMC meeting minutes would raise bets on a June rate hike.
With over 28 years of experience in the financial industry, Bob has worked with various global rating agencies and multinational banks. Currently he is covering currencies, commodities, alternative asset classes and global equities, focusing mostly on European and Asian markets.