Sterling higher after prices reports
PPI jumped a fair whack, the highest annual increase since Jul 2013. CPI jumped higher on the year. Only the core dropped.
GBP is higher across the board. Why? Ordinarily that's the right response to higher inflation numbers as it infers the possibility of rate hikes. Unfortunately we're not living in normal times and this higher inflation comes just as the BOE is embarking on another round of easing, including rate cuts.
It kind of makes the move in the pound seem rather strange. The BOE has said that they are ready to do more, and there's more chance of that happening than not, if you feel their mood.
Still, parts of the market still just trade as though everything is the same and so we're seeing the pound bought up on thoughts that the BOE might not cut if inflation keeps rising, even though the BOE has said no such thing.
The core number is the one that should be getting the attention as that's the number that the BOE will decide rates on. It fell and that's the only clue we need.
You have to remember that inflation can go to 20% but if it's imported via high energy prices or a lower pound, the BOE can do virtually nothing about it. If that inflation filters through to broad domestic prices, that's when they'll act.
A first look at 1.30 in cable has come up short but buyers are coming back for more after finding support at 1.2970. A break of the big figure will likely see more recent shorts from 1.30 getting out so be on watch for a stop run somewhere above 1.30. If we fail to break the level then we could have a quick trip right back down to pre-data area under 1.2900.
GBPUSD 15m chart
