Latest data released by ONS - 17 October 2018
- Prior +0.7%
- CPI +2.4% vs +2.6% y/y expected
- Prior +2.7%
- Core CPI +1.9% vs +2.0% y/y expected
- Prior +2.1%
A softer touch on inflation figures there and the pound is dragged to session lows on the back of that. Cable falls from 1.3155 to a low of 1.3126 on the day and with softer Brexit sentiment also weighing on the pound, this makes the 1.3100 handle an area to eye for in the session ahead by sellers.
Looking at the details, food and non-alcoholic beverages pushed down inflation but there's also notable decline in transport, recreation and clothing. July and August saw a spike in food prices as well as package holidays as a result of summer and good weather but we're starting to see those effects start to fade and this will surely rule out any talks of two rate hikes to be seen in a year by the BOE.
As for what it does for immediate rate hike odds, it basically means there will be no further rate hikes this year (Gilts will price this out completely now) and markets will instead focus on one in next year May.
In the context of the pound, it basically means a softer touch to add on top of the Brexit rhetoric but it's not a be all, end all data point that will cause a capitulation. Right now, it's still all about Brexit. For cable, sellers will be looking to hold a break below the 200-hour MA currently @ 1.3146.
Some other details on the day as producer price and retail price figures are released:
- PPI output +0.4% vs +0.2% m/m expected
- PPI output +3.1% vs +2.9% y/y expected
- PPI input +1.3% vs +0.8% m/m expected
- PPI input +10.3% vs +9.2% y/y expected
- RPI 0.0% vs +0.1% m/m expected
- RPI +3.3% vs +3.5% y/y expected
- August HPI +3.2% vs +3.1% y/y prior; revised to +3.4%
