Today brings us the latest UK CPI/RPI/PPI data at 08.30 GMT and it's unlikely to give Carney & Co much to cheer about

I have long argued on these pages, and elsewhere, that the Old Lady's bullish inflation forecasts for year-end were badly misplaced and the latest BOE infllation report would now seem to suggest their own position has become more realistic

Here are the main bullets from that report which you can read in full here

  • most MPC members see inflation rising more slowly due to sterling, oil prices
  • risks to global growth skewed moderately to downside reflecting Eurozone
  • medium term inflation expectations remain well- anchored
  • GBP appreciation to push down inflation for some time to come, poses down side risk to near-term path
  • BOE forecast shows 2% CPI in 2 years time based on market interest rates
  • 2015 GDP forecast +2.8% vs +2.5% prev, 2016 +2.6% as prev
  • wage growth in Q4 2015 +3.0% vs +2.5% prev Q4 2016 +3.75% vs +4.0% prev

Softer fuel and food prices plus the continuing strength of the pound on a trade weighted basis all make for a heady disinflation cocktail, and even MPC member Karen Forbes highlighted her concern on this when recently calling for interest rate rises "well before" inflation hits target

Expectations today are as follows:

We shouldn't be surprised to see a negative reading on CPI yy and PPI will be unlikely to give any cheer so an initial kick lower on GBP can not be ruled out, but this may be already factored in so caution is advised.

A stronger reading will give the pound bulls some cheer but we can expect rallies to be sold again

GBPUSD levels to watch from the current price of 1.5579 include initial offers/res at 1.5600, 1.5650 and the key res/offers around 1.5700 . Support/bids start at 1.5540-50, 1.5525 and 1.5500 with more at 1.5485

EURGBP has demand at 0.7080-85 and 0.7050 with offers/res at 0.7115-20, 0.7135 and 0.7150

As always trade what you see. Whatever the outcome the reaction will be knee-jerk and the longer term picture on the start of interest rate hikes will still remain subject to much conjecture