After a period of low inflation thresholds seen practically all over the continent, in recent months we read mainly of increases in price dynamics. This is confirmed not only by latest data from the entire euro zone and Poland, but also today’s report from the UK.
The results are very good, but…
It is true that analysts had expected jump in CPI inflation y/y (compared with January 2016) to 1.9% (from 1.6% in December), but the final result of 1.8%, and so optimistic. At the same time, inflation manufacturers (PPI) increased by 1.7% (forecast 1.0%, and the result from the previous month was revised strongly up to 2.7%).
For the rise in consumer inflation primarily has responsibility the transport (due to higher fuel prices) and restaurant sectors. It is in these two areas was recorded the strongest growth dynamics. Slides presented only a small sector of food and non-alcoholic beverages.
The following graph shows the historical approach of the British inflation, which from reaching the low below zero in the first half of 2015 years constantly climbs and is found on highest level since June 2014.
And producers inflation:
GBP firmly down – why?
Although it would seem that the rise in inflation and maintaining core inflation at the same level is a good result, investors assessed the situation completely differently. GBP against the major currencies noted dynamic depreciation immediately after the data, what is the reason?
Obviously due to that we missed the analysts’ forecasts. Those expected stronger growth in the range of the full CPI and acceleration of core consumer inflation – which have not managed to achieve and declines of pound did not stop the good results of the PPI. After the last words of Mark Carney BoE markets count that stronger inflationary spikes will increase the chance of a quicker response to their rate hike. With the appreciation observed today, it is still impossible.
In the initial reaction GBP/USD lost about 60 pips clearly exacerbating today’s lows on the chart H1:
EUR / GBP similar situation here more dynamic growth we’ve seen, but an hour earlier. So far the appreciation stopped the PP M4 (around the level of 0.8520). Before closing the candle we can witness a withdraw to PP R1 and 23.6% Fibo abolition.