The Pound gained early in the session after the UK’s inflation has unexpectedly rose above 3% led by a hike in the cost of air travel and computer games. The Consumer Prices Index showed that inflation grew to 3.1%, its highest rate in more than 5 years during November and far above the BoE’s 2% target. The pound responded positively to the news, with gains against the euro and the dollar.
The CPI figure was the highest measure of inflation since March 2012 and shows that the squeeze on consumers intensified in the run up to Christmas as the cost of living continues to increase well ahead of wage growth.
As the figure was above the Bank of England's inflation target Governor Mark Carney must now pen a letter to Chancellor Philip Hammond explaining why the rate missed the Bank's target by more than one percentage point. The Bank raised interest rates to 0.5% in early October to help tackle inflation.
The Dollar recovered after figures revealed U.S. producer prices rose in November as gasoline prices surged and the cost of other goods increased, leading to the largest annual gain in nearly six years.
The Labour Department reports on Tuesday suggested a broad acceleration in wholesale price pressures, which could assuage concerns among some Federal Reserve officials over persistently low inflation.
09:30 – GBP: Average earnings Index expected to increase to 2.5%
13:30 – USD: CPI forecasted to improve to 0.4%
19:00 – USD: FOMC Statement
19:00 – USD: Federal Funds Rate forecast to increase to 1.5%
19:30 – USD: FOMC press conference