UK Inflation Disappoints Expectation

GBP

The pound suffered slightly on Wednesday after UK inflation came in under expectations and concerns continued around the stalled Brexit talks between the government and the opposition. Annual consumer price inflation came in at 1.9 percent for March, below the 2 percent forecast, easing pressure on the Bank of England to tighten monetary policy. This fall showed that British wages are increasing and outstripping inflation whilst the UK is experiencing the lowest unemployment rate in 44 years. The Bank of England had previously alluded that it would lift interest rates to counteract inflationary pressures, but this seems highly unlikely if inflation stalls and the Brexit process is unresolved.

The pound also dropped after reports surfaced that talks between the Labour opposition party and the Tory government had stagnated and no tangible breakthrough had been found. A Labour spokesman did come out and deny this report, but until headway is made, it is unlikely to see sterling move too much to the upside. Implied volatility has fallen sharply and is a sign that investors are waiting to see what comes out next before placing bets on sterling’s next direction.

Key Announcements

09.30 – GBP: Retail Sales MoM; Forecast at -0.3% against previous of 0.4%
13.30 – USD: Core Retail Sales MoM; Forecast at 0.7% against previous of -0.4%
13.30 – USD: Retail Sales MoM; Forecast at 0.9% against previous of -0.2%