The latest UK CPI data received this morning shows that consumer prices slowed last month in the UK to 9.9% from the prior month’s 10.1%. The market was looking for an unchanged reading against that prior result and so the drop will no doubt be welcomed by UK households, despite confirming that inflation remains at elevated levels. The key now is whether the current inflation ceiling represents a peak or a pause, with that in mind traders will have to wait for September data to come through next month.
In the mean-time, the main focus for GBP traders is next week’s BOE meeting and, despite the softer data, the BOE is widely expected to push ahead with further tightening. Current market forecasts are fixed around a further .5% hike though, with inflation still sitting worryingly around the 10% mark, there are upside risks of a larger .75% hike.
The reversal lower in the FTSE has seen the market breaking back under the 7362.6 level. Momentum studies had been close to turning bullish ahead of yesterday’s moves, but have now been thrown off course. While price holds below this level, risks of a further test of the 7213.9 are building. To the topside, any recovery above the level will turn focus to 7558.7 next and the bear channel top.