GBP/USD drops to 1.3060 despite beating analysts estimate for consumer price inflation (CPI)

on Dec 18, 2019
Updated: Mar 11, 2020
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  • UK's CPI remained unchanged in November at 1.5%.
  • Analysts had expected the CPI to drop from October's 1.5% to 1.4% in November.
  • The upbeat report was unable to fuel a major upward rally in the forex market.
  • At -0.3% in November, UK's PPI missed the analysts' forecast of 0.0%.
  • GBP/USD dropped from 1.3060 level from 1.3121 on Wednesday.

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The United Kingdom’s Office for National Statistics announced the consumer price inflation (CPI) report on Wednesday. Posting better than expected figure for November (YoY), the report was still unable to inspire strength for Sterling in the forex market.

UK’s CPI Remained Unchanged At 1.5% In November

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The Consumer Prices Index that also includes CPIH (owner-occupiers’ housing costs) was reported at 1.5% in October. Following October’s report, analysts had anticipated the index to drop to 1.4% in November. Remaining unchanged at 1.5% in November, the report highlighted narrowly better than the expected figure on Wednesday.

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The report further added that in terms of year over year growth, housing, gas, electricity, water, and other fuels contributed the most (+0.36 percentage points) to the CPIH inflation rate (12 months). On the other hand, tobacco and accommodation services contributed the most in weighing the CPIH inflation rate (12 months) down in November.  

According to the report, recreation, food, and culture printed the biggest offsetting upward contributions. The prices were seen rising significantly in these segments in November as compared to the last year.

The UK’s Office for National Statistics also announced the Producer Price Index (PPI) report on Wednesday. The economic data recorded considerably worse than expected results but was unable to cast a strong impact in the forex market.

The UK’s PPI was reported at -1.1 in October. In light of the economic conditions, analysts had previously estimated the PPI to improve to 0.0% in November. Noting -0.3% in November (m/m), the data weighed on Sterling that was unable to post major gains despite the better than expected CPI (y/y) report.

Headline Rate For Output Inflation In The UK Recorded At 0.5% In November

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As of November, the report highlighted, output inflation’s headline rate remained capped at 0.5%. The headline rate was printed at 0.8% in October. According to the report, prices of manufacturing-related materials and fuels noted a growth rate of -2.7% in November. In October, prices were reported to have gained at the rate of -5.0% instead.

Output inflation’s annual rate was negatively affected by tobacco and alcohol the most in November. Crude oil, on the other hand, was reported to have cast a significant upward contribution to input inflation’s annual rate.

GBP/USD was seen trading at 1.3121 on Wednesday morning. Keeping below the opening level for the most part, the currency pair was seen trading as low as 1.3060 following the reports from the UK’s Office for National Statistics. Cable is currently trading at 1.3072. A daily close below the 1.3060 level will hint at an imminent bearish trend, as per the technical analysts.  

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