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Inflation drops to a year low

24th May 2018 Market Update

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?? GBP – Despite the recent rise in oil prices, inflation in the UK undershot expectations falling to 2.4% in April. Core inflation, which strips out volatile items such as food and energy prices, is now just above the BoE target (2%) sitting at 2.1%.

Sterling dropped on the back of the data with the prospect of a rate hike pushed back now to November. GBP/USD rates are now at their lowest for 5 months.

Today sees the release of retails sales which may well put further pressure on the pound as well as a speech by Mark Carney.

?? EUR – The euro continued its demise against the dollar, falling to a new 5 month low as monetary policy continues to diverge between the US and Eurozone.

?? USD – The US dollar continued its impressive recent form putting the currency at its strongest levels against both the pound and the euro for five months.

Last night’s minutes from the latest FOMC meeting seemed to come in line with market expectations, with the Fed suggesting that a 25-basis point rate hike is likely in June.

No data due out today.

 

Key Announcements

?? GBP
09:30am: Retail Sales: Expected to fall to 0.1%

 

Summary: Inflation in the UK dropped to a year low, receding the expectation of a rate hike in August.
 
In contrast the Fed has hinted at a further interest rate rise in June.

 

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Darren Kilner

Darren Kilner

Darren is Head of Dealing at FairFX. Darren lives and breaths FX, his Mastermind topics are G8 currencies and economic forecasts.

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