GBPUSD May Fall Further After In-Line UK Inflation Data

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GBP news, analysis and talking points:

UK headline inflation was unchanged at 2.4% in May, in line with expectations.

That’s unlikely to alter a Bank of England decision to leave UK interest rates unchanged next week.

– Meanwhile, GBPUSD is looking technically weak after breaking below trendline support.

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UK inflation stays at 2.4%

Inflation in the UK remained at 2.4% in May, as expected by analysts. That means the Bank of England’s monetary policy committee remains unlikely to raise bank rate from the current 0.5% when it meets next Thursday.

As a result, GBPUSD will likely stay under downward pressure, with the charts showing the pair has broken below support from a rising trendline marking the lower bound of a channel that has been in place since late last month.

GBPUSD Price Chart, One-Hour Timeframe (May 28 – June 13, 2018)

Latest GBPUSD price chart.

Chart by IG

Core inflation was also unchanged, at 2.1% year/year but a rise in oil prices since mid-April could feed through into higher consumer prices in due course, keeping headline inflation above the Bank’s target of 2.0%. Producer prices in the UK are rising too, with the cost of raw materials up 9.2% year/year in May and factory gate prices up 2.9%.

The CPIH measure, which includes housing costs, rose to 2.3% from 2.2%. “Recent large rises in the cost of crude oil have fed through to prices paid by consumers at the pump. Air fares and ferry prices also contributed to the overall increase in inflation due to the timing of Easter. However, these effects have been partly offset by price falls in computer games and energy costs rising by less than this time last year,” said the Office for National Statistics’ Head of Inflation Mike Hardie.

“Annual house price growth continued to slow, with weak growth in London offset by increases in the South West and West Midlands. Nationally, rental prices remained unchanged, with rents in London falling on the year for the first time in nearly eight years,” he added.

Brexit still in focus

Later this session, the UK House of Commons will continue to debate the EU Withdrawal Bill and that too could add to the downward pressure on GBPUSD. UK Prime Minister Theresa May will likely agree to more concessions to keep rebels in her party in line when a further series of votes takes place.

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— Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

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