...

In May, UK CPI Inflation Drops to 2.0 YoY and Reaches The BoE’s Objective

Facebook
Twitter
LinkedIn
Reddit
Tumblr
In May, UK CPI Inflation Drops to 2.0 YoY and Reaches The BoE's Objective
  • May saw a 2.0% increase in the UK annual CPI compared to predictions of 2.0%.
  • In May, British inflation held steady at 0.3% Mum, matching projections.
  • GBP/USD remains above 1.2700 following statistics on UK CPI inflation.

The Consumer Price Index (CPI) for the United Kingdom (UK) climbed by 2.0% annually in May after rising by 2.3% in April, according to statistics issued on Wednesday by the Office for National Statistics (ONS).

For the first time since 2021, the measure came back to the Bank of England’s (BoE) target and matched market forecasts of a 2.0% growth.

While in line with expectations, the core CPI (which excludes volatile food and energy categories) increased 3.5% YoY in May, down from a 3.9% increase in April.

The UK services CPI increased 5.7% YoY in May, somewhat less than the 5.9% increase in April.

The UK Consumer Price Index increased by 0.3% Mum in May, matching the rate of increase observed in April, but falling short of the anticipated 0.4% increase.

GBP/USD reaction to the UK CPI inflation data

The GBP/USD pair maintains its range above 1.2700 despite the UK CPI data failing to have any significant impact on the Pound Sterling. For the day, the pair is up 0.04% in trade.

GBP/USD
UK CPI inflation data

The UK Consumer Price Index (CPI) data preview was released at 02:15 GMT in this section.

  • The May CPI data will be released on Wednesday by the UK Office for National Statistics.
  • It is anticipated that UK inflation will decline and return to the BoE’s target level.
  • On Thursday, the Bank of England will make its monetary policy announcement.
  • Inflation data is predicted to cause the pound sterling to react wildly.

On Wednesday at 06:00 GMT, the Office for National Statistics (ONS) of the United Kingdom (UK) will release the May Consumer Price Index (CPI) report. The Producer Price Index (PPI) data for the same period will be released by the ONS at the same time.

The UK’s inflation rate is still higher than the Bank of England’s (BoE) 2% objective. The most recent statistics show that core annual inflation in April was 3.9%, while the UK CPI increased by 2.3% YoY. For the first time in almost three years, market players predict that the CPI will have increased by 2% YoY in May, matching the BoE’s target.

What to expect from the May UK inflation report?

The core annual reading is forecast at 3.5%, although the financial markets estimate that the UK headline CPI increased 2% YoY. Compared to April’s data, which showed a 2.3% increase in the CPI and a 3.9% core reading (which excluded volatile food and energy costs), those numbers would indicate an improvement.

Nonetheless, May’s monthly inflation rate increased by 0.4%, which is higher than the previous month’s 0.3%. particularly if the outcome might not be very concerning, a rise in price pressure, particularly at this low level, could deter markets.

At its meeting in May, the Monetary Policy Committee (MPC) of the Bank of England maintained interest rates at a multi-year high of 5.25%, despite the preference of two of the nine voting members to lower rates by 25 basis points (bps).

Governor Andrew Bailed of the Bank of England stated, “We are not yet at a point where we can cut the base rate,” even though officials acknowledged the inflation’s steady decline. In the short run, consumer inflation is expected to reach the 2% target, according to central bank economic estimates presented concurrently with the May meeting. However, later in the year, when base effects connected to energy start to fade, inflation may slightly increase. Inflation in the service sector stayed at 6.0% as of March, exceeding the BoE’s target, as noted by policymakers.

Is it possible for a 2% print to prompt a rate decrease as early as this week? It seems difficult, but not insurmountable. While regulators prefer to focus on service inflation, market participants may pay attention to headline data. The likelihood of an interest rate cut in June will undoubtedly increase if the most recent data drops much and headline readings match predictions. However, market participants think the BoE will continue to hold rates on hold before the inflation data is released. 

When will the UK Consumer Price Index report be released and how could it affect GBP/USD?

CPI and PPI figures from the UK will be released on Wednesday at 6:00 GMT. The US Dollar (USD) has been trading steadily higher versus the Pound Sterling (GBP) since the US reported that price pressures continued to ease in May. The GBP is currently trading below the USD 1.2700 barrier. Despite this, the US Federal Reserve (Fed) maintained rate stability and hinted that it would lower rates one or two times before the year was out.

The European Central Bank (ECB) and the Bank of Canada (BoC) have already lowered interest rates, so for once the Fed did not beat its big rivals. Thus, as inflation gets closer to the level that policymakers find comfortable, the BoE may move forward with greater confidence.

In light of this, the data that were made public on Wednesday might cause some crazy fluctuations in the price of GBP crosses. Higher-than-expected data should, in general, indicate a stable BoE and support the Pound.

If market expectations for inflation-related data are not met, speculative interest will quickly price in a rate decrease, which could happen as soon as this week, and push the pound. Remember that market participants can decide to hold their positions before the BoE releases its statement in a day.

“The GBP/USD pair has held around the 1.2700 mark for five consecutive weeks, showing little sign of directional progress,” says Valeria Bednarik, Chief Analyst at FXStreet. The price range of 1.2660 has been established as the bottom, and it peaked on June 12 at 1.2859. The GBP/USD pair weakens ahead of the announcement and approaches the lower limit of the previously specified range.

From a technical perspective, the evidence for a bearish extension has strengthened on the daily chart as the pair approaches a directionless 100 SMA, which offers adaptive assistance at about 1.2640, and develops below a now flat 20 Simple Moving Average (SMA). While this is going on, technical indicators remain below negative levels, albeit with varying degrees of strength, making it impossible to predict a direction.

“The pair can quickly reach the 1.2600 mark en route to 1.2520 if GBP/USD breaks below the 1.2640/50 area,” Bednarik continues. The upside appears to be more disorganized. Around 1.2800 is when sellers have refused advances; yet, the top at 1.2859 is equally significant. If the market breaks above the latter, a strong rise may be anticipated, but this is unlikely to happen until after the BoE’s monetary policy announcement.

MAJOR Listing Date and Estimated Price For 2024 and 2030

Based on the pre-market information shown in the graphic, the MAJOR token has a total quantity of 10 billion tokens and is currently trading at $0.0155. As the project enters

Massive Backlash Against Hamster Kombat Due to Unfair Airdrop

Despite spending a lot of time and energy on the game and being informed at first that keys were not important, players are furious that they are being called cheaters

Trade With A Regulated Broker

M4Markets founders are people who are not just traders themselves, but people who have been in the finance sector for so long that they bring with them a wealth of valuable knowledge.

BlackBull Markets offers the full MetaTrader suite (MetaTrader 4 and MetaTrader 5) alongside multiple social copy trading platforms and a web app powered by TradingView.

Online trading on Exness‘ powerful trading platform with better-than-market conditions on the world’s financial markets and trading .

AvaTrade, we offer a wide variety of platforms for traders of all levels! Be empowered to trade CFDs on FX, Stocks, Commodities, Crypto, Indices.

Being an international broker and working with clients from different countries we understand that every person is unique in his values, no matter whether a trader or a partner.

For more than 13 years, they’ve purpose-built their platform and services to help you trade seamlessly and better capitalize on market opportunities.

Gate.io is the best exchange app. The interface is simple to operate and the customer service is quick. Some interesting activities and benefits are often presented!

FP Markets has developed a proud reputation as a Forex broker. In Australia, the company operates under an Australian Financial Services

Seraphinite AcceleratorOptimized by Seraphinite Accelerator
Turns on site high speed to be attractive for people and search engines.