UK inflation has risen more than expected, with official data yesterday showing consumer prices rising well above the Bank of England's 2% target and at their fastest rate since June 2013.
The consumer price index rose 0.5% in April compared to March, with the year-on-year inflation rate rising to 2.7% from 2.3% the previous month. This was above expectations of an increase to 2.6%, but in line with the BoE’s forecast last week.
There was a drop in fuel prices for the month, while prices for clothing and electricity were contributors in pushing prices higher. On an annual basis, all components saw higher prices, with the biggest increase coming from transport, together with housing and household services. There was also an impact from the timing of Easter, with the seasonal increase in prices seen in April this year compared with March last year. In addition to this, there was a sharp increase in airfares for the month.
The Euro rose more than 1 percent against a broadly weaker Dollar yesterday, on signals on further European integration contrasted with political turmoil and fresh doubts about the economy in the United States.
Data released in the morning showed that the euro zone grew at 1.7 percent year-on-year in the first quarter, which was in line with expectations. Euro zone markets were meanwhile boosted by robust growth data, as well as talks between German and French leaders which sought to reinvigorate a European project shaken by Britain's planned exit and may even open the door to changing treaties to facilitate ambitious reform.
The US Dollar continued to lose ground yesterday, prompted by allegations that President Donald Trump had disclosed highly classified information to Russia's foreign minister about a planned Islamic State operation.
Analysts said that this news around Trump has raised fresh fears that he might not last a full term and that, even if he does, there are too many distractions for him to be able to push through his economic stimulus programme.
09:30 : GBP - Average Earnings Index 3m/y, expected at 2.4% against a previous of 2.3%
09:30 : GBP - Unemployment Rate, expected to remain at 4.7%
15:30 : USD - Crude Oil Inventories, expected at -5.2M