19/07/2018 - Pound Falls as UK Inflation Holds Steady

GBP

British inflation unexpectedly held steady last month, denting market confidence about a Bank of England interest rate hike in August and sending the pound to a 10-month low against the dollar. Despite motor fuel prices rising to their highest since 2014, annual consumer price inflation held in June at 2.4 percent. Core inflation, which strips out energy, food, alcohol and tobacco prices, fell to 1.9 percent from 2.1 percent in May — below all forecasts and the weakest reading since March 2017. One measure of financial market pricing after Wednesday’s figures showed a roughly 70 percent chance of a move next month compared with nearly 80 percent before the inflation figure was printed.

Prime Minister Theresa May said on Wednesday her government had begun negotiations with the European Union based on her hard-won Brexit plan, pressing on with a proposal despite tough criticism from both sides of her Conservative Party. May signalled she would not drop a proposal on Britain’s future relationship with bloc - the biggest shift in its foreign and trade policy for almost half a century.

Boris Johnson, who quit over what is called the Chequers plan, was one of the first to renew his call for government to rethink its strategy, saying “it is not too late to save Brexit”. In an earlier session of parliament, May stood firm after being challenged by one pro-Brexit MP in her party to explain when she had decided to change her catchphrase from “Brexit means Brexit”, to “Brexit means Remain”.

EUR

Euro area annual inflation accelerated in June, exceeding the European Central Bank's target of 2% final data from Eurostat confirmed Wednesday. The annual inflation rate rose to 2 percent from 1.9 percent in May, in line with the flash estimate at the end of June. The biggest contribution came from energy, followed by services, and food, alcohol and tobacco. Fresh food inflation climbed to 2.9 percent from 2.4 percent. Energy inflation rose to 8 percent from 6.1 percent.

Key Announcements

09:30 - GBP: UK Retail Sales (June) Expected to fall to 0.4% from 1.3%

13:30 - GBP: US Initial jobless Claims Expected to increase to 220K from 214K