As inflation tumbles in the UK it’s not taken long for the rubbers to come out on the rate forecasts. RBS is one of the first to push back the timing of the first UK interest rate hike to August 2015 from Feb 2015. They do still expect the BOE rate to be 1% by the end of 2015.
Cable has been spanked accordingly on the much worse than expected inflation data but it’s not as bad as it looks. One of the main drivers of the lower inflation was transport costs which came by way of lower sea and air fares. Possibly a result of the lower fuel costs or due to a lack of travelling. In the retail sector restaurant prices fell as did household services, which include utilities and accounts for a third of the rate of inflation. If food and petrol were stripped out inflation would have been a third higher, says the ONS. The RPI held up which suggests that the retail sector overall is still in a fairly good shape and that bodes well for the next retail numbers.
We’re starting to see some effects of lower food and energy costs and so it’s no surprise to see inflation lower. That also goes for the core numbers too.
Even so it’s got the analysts bashing their calculators and scribbling on their calendars and the rate trade is suffering as date further in the year get circled.
GBP/USD is slipping down to a fairly big historical support level at 1.5920. It also houses the 55 mma. We’ve been as low as 1.5920 so the level’s holding so far.
GBP/USD Monthly chart 14 10 2014
A break below here an 1.5900 opens the door to a move to the 61.8 fib at 1.5720 but there’s monthly support at 1.5890/95 & 1.5850/55 to get through first.
