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Fundamental Forex Analysis

UK annualized CPI misses estimates with +0.8% in April, GBP/USD keeps gains

  • UK CPI rises 0.8% YoY in April vs. +0.9% expected.
  • Monthly UK CPI arrives at -0.2% in April vs. -0.1% expected.
  • GBP/USD keeps gains near 1.2270 amid broad dollar strength.

The UK Consumer Prices Index (CPI) 12-month rate came in at +0.8% in April when compared to +1.5% booked in March while missing expectations of a +0.9% print, the UK Office for National Statistics (ONS) reported on Wednesday. 

Meanwhile, the core inflation gauge (excluding volatile food and energy items) arrived at +1.4% YoY last month versus +1.6% booked in March while missing the consensus forecast of +1.5%.

The monthly figures showed that the UK consumer prices arrived at -0.2% in April vs. -0.1% expectations and 0.0% last.

Main points (via ONS):

“The largest contribution to the CPIH 12-month inflation rate in April 2020 came from recreation and culture (0.31 percentage points).

Falling energy and fuel pump prices resulted in the largest downward contributions to the change in the CPIH 12-month inflation rate between March and April 2020.

Rising prices for recreational goods resulted in a partially offsetting upward contribution to change.

As a result of the ongoing coronavirus (COVID-19) pandemic, we identified 90 CPIH items (or 16.3% of the CPIH basket by weight) that were unavailable to consumers in the UK, as detailed in Coronavirus and the effects on UK prices; compared with the February 2020 index (the most recent “normal” collection), we have collected a weighted total of 77.8% (excluding unavailable items) of the number of price quotes for the April 2020 index, although the coverage varies across the range of items.”

FX implications:

Following the below-estimates UK CPI numbers, the GBP/USD pair kept its range trade intact around 1.2265 region, up 0.15% on a daily basis.

All eyes remain on the Bank of England (BOE) Andrew Bailey’s testimony due later on Wednesday at 1330 GMT for fresh direction.

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