UK Inflation

The British Pound advanced against the Euro, Dollar and other major currencies mid-week following the release of hotter-than-expected UK inflation numbers, but the key focus for FX markets remains tonight's Federal Reserve event which could trigger more durable moves.

UK inflation rose by a greater margin than analysts had been expecting, but the rise was by no means surprising enough to warrant a major reconsideration of how the Bank of England might shift its views on interest rates.

A stack of evidence is piling up that the global economy is heading for a spike in inflation say analysts, as logistical challenges and the rising cost of raw materials converge.

UK inflation in February was a great deal softer than analysts were expecting, but the consensus amongst economists remains that a steady rise in prices lies ahead.

UK Inflation is depressed, but it will start climbing again over coming weeks and months and in five years from now could be as high as 2.4% according to economists.

Inflation is back on the radar for investors who worry that the response by governments and central banks to the covid-19 crisis is storing up higher prices in coming months and years.

UK inflation rose again in December and surpassed the expectations of market participants, but the rises are not yet significant enough to suggest there is any reason for the Bank of England to shift course on interest rates or other monetary policy settings.

The Consumer Prices Index (CPI) measure of inflation in the UK was 0.7% higher year-on-year in October 2020, up from 0.5% in September and a beat on consensus market expectations for a reading of 0.60%.

The closing of the Eat out to Help out scheme at the end of August resulted in a jump in monthly inflation in September, but price rises are still well below trend and suggest the Bank of England has scope to ease monetary policy further.

Falling demand for international travel and the Eat Out to Help Out scheme meant prices in the UK fell 0.4% between July and August, according to the ONS.

UK inflation for July came in hotter than expected, a development that will likely ensure the Bank of England maintains a cautious approach to cutting interest rates and boosting quantitative easing which is in turn supportive of Sterling.

Following the release of inflation data there was a tick higher in the value of Sterling which had been recover the ground it lost over the course of the first two days of this week.

The UK economy could be about to enter a period of deflation, according to analysis from independent economics research and consultancy firm Capital Economics.

The UK's rate of inflation has fallen to its lowest level since 2016 thanks largely to the global slump in oil prices, but a recovery in oil and an exit from lockdown should mean that the economy should see prices start to pick up once more.

The Pound is subject to global currents sweeping the foreign exchange markets with a broadly softer U.S. Dollar aiding the GBP/USD higher. However, rumours on the state of Labour-Conservative Brexit talks and UK inflation data out mid-morning are likely to form the focus of Sterling trade over coming hours.

The Pound was treading water while caught in the glare of Brexit-shaped headlights on Tuesday, leading it to overlook a robust set of February labour market figures from the UK economy, which have led economists to speculate that another Bank of England (BoE) interest rate hike may not be far off. 

Inflation fell beneath the Bank of Engand (BoE) target in January for the first time in two years, although consumer price pressures are still too high for many economists, who say interest rates will rise in the coming months as a result.

Inflation fell to within a whisker of the Bank of England target, according to official data released Wednesday, although changes in other measures of price pressures have led economists to claim the Bank of England (BoE) will be forced to come off the sidelines before long.

The British Pound retreated further from earlier highs Wednesday after official data showed inflation surprising on the downside in October and as a parliament-shaped question mark hung over Prime Minister Theresa May's Brexit agreement.

Pound Sterling was seen moving lower on the back of some disappointing inflation numbers for September that showed both headline and core inflation came in below expectati