Pound Higher Despite Cooling UK Inflation
June 19 2019 - 1:46AM
RTTF2
The pound was higher against its most major counterparts in the
early European session on Wednesday, despite the release of a data
showing a slowdown in UK inflation to the central bank target in
May.
Data from the Office for National Statistics showed that
consumer price inflation came in at 2 percent in May versus 2.1
percent in April. The rate matched expectations. The annual decline
was largely driven by air fares and falling car prices.
On a monthly basis, consumer prices gained 0.3 percent versus
0.4 percent rise a year ago.
Core inflation that excludes energy, food, alcoholic beverages
and tobacco, also slowed in May, to 1.7 percent from 1.8 percent in
the previous month.
The consumer prices index including owner occupiers' housing
costs advanced 1.9 percent annually in May, down from 2.0 percent
in April.
Separate data showed that factory gate inflation slowed to 1.8
percent from. 2.1 percent in April. But this was above the forecast
of 1.7 percent.
Month-on-month, output prices rose 0.3 percent for the second
straight month compared to expectations of 0.2 percent.
Further, input price inflation eased sharply to 1.3 percent from
4.5 percent in April. Nonetheless, this was above the forecast of
0.8 percent. On month, input prices remained flat versus the
expected growth of 0.2 percent.
In a separate communiqué, the ONS said house price inflation
slowed to 1.4 percent in April from 1.6 percent in March. The
lowest annual growth was in London, where prices fell 1.2 percent
over a year ago.
Investors waited for the outcome of the FOMC meeting amid
increased expectations for dovish remarks.
With trade tensions threatening global growth, it is expected
that the U.S. central bank would follow the lead of the European
Central Bank and open the door to future rate cuts.
The Bank of England will announce its policy decision on
Thursday.
The BoE is likely to keep policy on hold, given continued Brexit
uncertainty.
The currency has been trading higher against its most major
counterparts in the Asian session, as Boris Johnson remained the
front runner in the second round of voting in the U.K. leadership
race.
The pound appreciated to a 2-day high of 1.2580 against the
greenback, up from a low of 1.2543 seen at 3:15 am ET. The pound
may test resistance around the 1.27 level, if it rises again.
Following a decline to 0.8927 at 3:15 am ET, the pound reversed
direction and advanced to a 2-day high of 0.8907 against the euro.
The currency is seen finding resistance around the 0.88 region.
Data from Destatis showed that Germany's producer price
inflation slowed in May.
Producer prices climbed 1.9 percent year-on-year in May, after a
2.5 percent increase in April. Economists had expected a 2.2
percent rise.
The pound rose back to 136.32 against the Japanese yen, heading
to pierce a 2-day high of 136.49 touched at 7:45 pm ET. The pound
is poised to face around resistance the 138.00 region.
Data from the Ministry of Finance showed that Japan had a
merchandise trade deficit of 967.1 billion yen in May.
That exceeded expectations for a shortfall of 1,207.0 billion
yen following the 110.9 billion yen deficit in April.
On the flip side, the pound was trading lower at 1.2550 against
the franc, following a 2-day high of 1.2585 set at 10:30 pm ET. On
the downside, 1.23 is possibly seen as the next support level for
the pound.
Looking ahead, Canada consumer inflation for May is due in the
New York session.
European Central Bank President Mario Draghi will give closing
remarks at the ECB Forum on Central Banking in Sintra at 10:00 am
ET.
At 2:00 pm ET, the Fed announces its decision on interest rate.
Economists widely expect it to keep federal funds rate at 2.25 -
2.50 percent.
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