CPI Rises Again in July
The British Pound has seen fresh buying pressure this week in response to the latest UK economic data released today. The Office for National Statistics reported that UK CPI rose 1% in July, beating both the prior and expected 0.6% reading. The increase, which takes inflation back to its highest rate since March was fuelled mainly by upward prices pressure in clothing, fuel, furniture and household goods.
Petrol Prices Surge
Looking at the breakdown of the data, fuel prices were seen rising at their fastest pace in nearly a decade. Commenting on the increase, the ONS said: "Between June and July 2020, petrol prices rose by 4.9 pence per litre, to stand at 111.4 pence per litre, and diesel prices rose by 4.0 pence per litre, to stand at 116.7 pence per litre.
In comparison, between June and July 2019, petrol and diesel prices fell by 0.9 and 2.3 pence per litre, to stand at 127.3 and 132.0 pence per litre, respectively. This month’s rise in petrol prices was the largest monthly increase since between December 2010 and January 2011, when prices rose by 5.4 pence per litre (to stand at 127.4 pence per litre)."
Core CPI Almost Back At Target
Core CPI, the measure which strips out energy and fuel, was seen rising at an even faster pace at 1.8% in July, marking a firm increase on the prior month’s 1.4% reading and also beating expectations of a 1.8% reading.
For now, the Bank of England is unlikely to alter its monetary policy stance, though, with core inflation nearly back at target, the situation is certainly one which needs to be carefully monitored. The jump in inflation is bad news for UK consumer who are suffering record joblessness as a result of the pandemic. Inflation is now rising at a much quicker pace than anticipated however, looking ahead there are indications that inflation could move pause. The UK government’s Eat Out To Help Out scheme, which discounts eat-in food prices by 50% Monday – Wednesday, as well as the temporary reduction in VAT for hospitality tourist venues, should see some curtailing of the inflationary rise over August.
Technical Views
GBPUSD (Bullish above 1.3191)
From a technical viewpoint. GBPUSD continues to move higher within the bullish channel which has framed the recovery and price has now broken above the 1.3191 level. While above here, the outlook remains firmly bullish with the 1.3516 level the next upside target for bulls.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!