UK headline CPI came in at 6.8% y/y, which was lower than the previous print of 7.9% y/y. However, core CPI is 6.9% y/y, the same as the prior month.
Inflation is down from current cycle highs but is still far above the Bank of England's (BoE) target of 2%.
The Office for National Statistics (ONS) said that lower gas and electricity were the biggest contributors to the drop in CPI, with food inflation rising less than the previous comparative period.
However, the BoE will be monitoring core and services inflation closely. The fact the core CPI did not move from the prior print, and that services inflation increased to 7.4% (7.2%) will concern the central bank.
Wage growth will also pose a headache, growing at the fastest rate since records began in 2001.
Another 25 basis point hike in September by the BoE is a distinct possibility.
In response to the CPI release, GBPUSD has moved positively with its green 5-hour EMA crossing above its orange 10-hour EMA (black ellipse) and the stochastic popping positively (red ellipse). If the stochastic moves above 80 and holds (blue arrow), an underlying positive momentum will be supporting cable on the hourly period.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.