The latest UK inflation data today offered some hope for consumers. Headline CPI was seen dropping back to 8.7% last month, down from 10.1% the prior month. This marks the first time that UK inflation has been back in single digits since August last year.  However, the result was a little higher than the 8.2% the market was looking for and with core inflation seen rising against the prior month, the focus is on a further BOE rate hike next month.

Core CPI Rises

Core inflation printed 6.8%, up from the prior month’s 6.2% reading. While obviously moving in the right direction, a welcome sign for UK households and businesses, the key issue here is stickiness. Still more than 4 times the BOE’s target, inflation remains well above other economies in the G7and as such, the focus is on further action to come from the BOE.

Market Reaction 

GBP has been a little firmer on the back of the data. The firmest gains have been seen against risk currencies which remain under pressure today given the weaker tone to risk appetite as US debt ceiling uncertainty continues. GBPUSD is showing weaker upside given the safe haven demand we’re seeing for USD currently.

Technical Views

GBPAUD

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The correction lower from highs around 1.8980 has seen the market finding strong support into  the 1.86 level. Price has since bounced and is now pushing back up towards those highs. Supported by the bull channel and with momentum studies pushing higher, the focus is on further move up and a breakout towards the 1.9170 level next. 

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