GBP/USD Trading Lower as UK Inflation Figures Miss Expectations

DailyFX.com –

Talking Points:

– The British Pound trading lower versus other major
currencies

– UK’s Core CPI at 1. 2 %, below expectations

– Headline CPI falls to 0. 3 % year-on-year vs 0.5% prior and
expected

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The British Pound traded lower versus other major currencies
(at the time this report was written), after the UK’s Consumer
Price Index (CPI) figures released today showed inflation slowed
in April.

Headline CPI figure showed an annual rise of 0.3% percent,
below the prior and expected reading of 0.5%. The month on month
figure came below expectations as well, by printing 0.1% versus
the expected figure of 0.3%, which was below the prior 0.4%.

Core CPI, which excludes volatile factors such as food, ene
rgy, alcohol, and tobacco, eased to 1.2% from the prior figure of
1.5%, and was below an expected 1.4% print.

Looking into the report, the Office for National Statistics
signaled the causes for the drop in the CPI figures as lower cost
of air fares and clothe s.

CPI readings are a key measure for the BoE in deciding
appropriate monetary policy. In their latest rate decision, the
BoE kept policy unchanged, and
warned that a “Brexit” from the European
Union

could bring lower growth, higher unem ployment, and higher
inflation. The bank also lowered growth projections for 2016 to
2% versus the prior 2.2%, while also lowering projections
slightly for 2017 and 2018.

As was mentioned earlier today by DailyFX Currency Strategist
Ilya Spivak,
News-flow out of the UK has increasingly
underperformed

relative to consensus forecasts since early April, hinting at a
downside surprise. With inflation far from the BoE target of 2%,
hinting that tightening is still some way off, and Brexit
concerns in the background, it seems the CPI figures missing
expectations today might have added to an overall uncertain view
for the UK economy, and British Pound declined versus other major
currencies.

Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is
showing that about 50.73% of FXCM’s traders are long the GBP/USD
at the time of writing, i mplying a lack of directional
conviction for the pair by the retail trading crowd.

You can find more info about the
DailyFX SSI indicator here

GBP/ USD 5 – M inute Chart : May 17, 2016

— Written by Oded Shimoni, DailyFX Research

To cont act Oded Shimoni, e-mail

oshimoni@fxcm.com

original source

DailyFX

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in:

Investing

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