UK headline inflation dropped to 10.1% with a 4% drop in petrol and diesel prices in January. The core inflation rate decreased below 6%. The continuous disinflation trend in goods categories due to improving supply chains and lower consumer demand is linked to the decline in core inflation.
The BoE is focusing on "inflation persistence." Here, services show more persistent inflation trends, which are less volatile. A monthly drop in various hospitality categories also contributed.
The GBPUSD declined in response. It is getting pushed and pulled from both signs, given the US CPI release.
Yesterday's candle is an inverted hammer. I.e. cable bulls lost control at the high of the day, following the US CPI release. Bears then pushed it lower. Today's UK CPI print sees bearish follow through, with the currency pair threatening to drop into its bearish channel between the lower blue and red bands.
The stochastic will yield important information. A movement into its lower quintile (blue arrow) will connote an underlying bearish momentum.
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.