Sterling sells off after weaker CPI data

Tuesday, August 19, 2014

Sterling came under pressure against the dollar today after inflation data released this morning showed a greater than expected fall in prices in July. Month on month, consumer prices fell 0.3% against expectations of a 0.2% fall bringing the year-on-year change in CPI to 1.6%, down from the previous month’s reading of 1.9% and against expectations of 1.8%. The larger decline in inflation saw sterling trade drastically lower at the time of the release dropping almost a cent against the dollar. At the time of writing GBP was trading at 1.6617, down 0.67% on the day as investors revised lower the likelihood that the Bank of England would raise interest rates this year, reinforcing the earlier view of a later than previously expected rates rise after the BoE slashed wage growth forecasts last week.

Wall Street looked set to post successive gains today, carrying on the bullish mood seen in European equity markets on renewed risk appetite. Encouraging housing starts data confirmed the improvement in the NAHB housing market index saw benchmark indices trade broadly higher as geopolitical tensions took a backseat. Housing starts increased 15.7% in July as 1093K properties were started against expectations of 965K. With CPI figures for July also coming in as expected it seems the relief rally sparked yesterday is set to continue provided the situations in Ukraine and Iraq do not worsen. 

GBP faced a precipitous decline on weaker inflation data

GBP Curncy British Pound Spot 2014 08 19 15 23 43

US housing starts rebound in July

NHSPSTOT Index US New Privately 2014 08 19 15 38 56

Topics: GBP, CPI
More from: Kash Kamal