The United Kingdom’s Office for Labor Statistics announced the monthly consumer price index (CPI) report on Wednesday. Having missed the analysts’ estimate, Sterling was seen losing traction in the forex market following the release of economic data.
In November, Labor Statistics had revealed the UK’s monthly CPI to have improved by 1.5%, following which, analysts had anticipated a further improvement of 1.5% in December. As per the economic data on Wednesday, however, the UK’s consumer price index remained capped at a considerably lower 1.3% last month.
December’s Core Inflation Gauge Remained Capped At 1.4%
Excluding food and energy components that are known for volatility, the core inflation gauge, on the other hand, was reported to have climbed 1.4% in December (year over year). The YoY growth in core CPI was recorded at 1.7% in November while the experts had estimated an additional 1.7% growth in December as well.
Wednesday’s report further highlighted that the CPIH 12-month inflation rate saw the most significant contribution from water, housing, gas, electricity, and other fuels in December, marked at +0.36%. On the other hand, in terms of downward contributions, clothing and accommodation services took the lead in the last month.
GBP/USD Lost Strength In The Forex Market Following The Economic Data
GBP/USD was seen trading above the crucial 1.30 mark earlier in the day. Following the economic data, Cable failed to sustain above 1.30 again and was last seen trading as low as 1.2980. The U.S monthly PPI report later in the day is expected to be the next mover for the GBP/USD pair on Wednesday.
GBP/USD had hiked to 1.35 level in the past month following Conservative’s victory and Boris Johnson’s reelection as the UK’s Prime Minister on December 12th. The gain, however, was largely unstable as the pair dropped back to the pre-general election level of around 1.30 later in the month. While the country is set to leave the European Union (EU) on January 31st, analysts and investors are worried that the Prime Minister’s deadline of December 2020 to strike a broad trade deal with the EU may just turn out to be too short.
Such complications continue to stir uncertainty in the forex market with the GBP/USD having challenged the 1.30 level multiple times in the previous weeks while failing to sustain above it every time so far.