UK consumer prices declined 0.5% in January and, although the year-on-year rate increased to 1.8% from 1.6% which was the highest rate since June 2014, this was slightly lower than the consensus forecast of a sharper increase to 1.9%.
There was significant upward pressure on transport costs which was offset by a decline in clothing prices.
The data will dampen expectations that the Bank of England may need to tighten monetary policy more aggressively to curb inflation, although there was a larger than expected increase in producer prices which suggests underlying pressures may be building.
Sterling weakened significantly following the inflation data with the UK currency moving back below the 1.2500 level as the Euro moved to the 0.8520 area, although gilts reversed initial gains.
The UK currency was resilient at lower levels and regained support during the New York session as the Euro retreated back below 0.8500. The latest labour-market data will be released on Wednesday with a particular focus on the earnings data.
Uncertainty and GBP This is the word that dominates market thinking at present. No surprise that like the US Federal Reserve, the Bank of England left UK interest rates unchanged with that uncertainty overshadowing all markets plus the expectation of UK inflation rising from its current 3% rather than falling to the target of 2%. […]
OECD The Organisation for Economic Co-operation and Development slashed their forecast for 2025 EU growth this week from 1.3% to 1.0%. Germany with slated growth of just 0.4% down from 0.7% was described with a rare touch of OECD humour as the weakest link. While better described as the prime culprit, the effect of flaccid […]
US Dollar Uncertainty in the USA caused by a consequential cocktail of on off on tariffs, inflation concerns, derailed interest rate policy, federal spending and higher taxes is outweighing the safe haven status of the Dollar. In more normal times, the Ukraine ceasefire brinkmanship between Russia and the USA would drive up the USD. Instead, […]