UK Inflation Breaking News:  maintains 10% level for 7th month. Although it exceeds expectations, inflation is still declining.

UK inflation May’s 25 bps Bank of England rate increase is all but assured

GBPUSD FUNDAMENTAL REVIEW

UK Chancellor Hunt: The CPI numbers underscore the reason why we have to keep going with our attempts to bring reduce inflation.

Although UK inflation (see economic calendar under) is surprising to the upward this morning. The British sterling is somewhat lower than the US dollar. The Fed’s Bostic and Bullard’s pessimistic rhetoric appears to be continuing throughout the US trading day. But We believe that when Europe gets going, the pound’s value may recoup some of its missed gains.

Economic Activity Schedule

Based on the CPI graph, food, and non-alcoholic drinks. Recreation and culture were the top industry providers of the inflation estimate. Core and headline statistics both exceeded expectations. Whereas PPI joined suit (though at a lesser rate than the Feb publish). Currently, the UK has the biggest rate of inflation in Western Europe. This puts additional strain on the Bank of England.

UK inflation will ensure a further rate increase in May.

Looking at the money market pricing.  There is an almost certain chance that the BoE will raise interest rates by another 25bps next month. Starting with yesterday’s employment report, which reaffirmed the severe job market situation in the UK, this week has been very significant and its input statistics.

Mixing the two sets of data suggests that the BoE may still need to tighten monetary policy further in order to reduce inflationary pressures. In the comment from UK Chancellor Hunt above, the first indications of which have emerged. The BoE’s Catherine Mann is expected to talk later today and may very possibly reaffirm these aggressive views.

GBPUSD Technical Perspective

As markets digest the most recent data, daily GBPUSD price activity is concentrated around the psychological level of 1.2400. We anticipate more gains for the remainder of the trading day. As recent Fed remarks and advice have receded some of their impacts, which has opened the door for the GBP rise.

Major resistance levels:

• 1.2667
• 1.2500

Major support levels:

• 1.2400
• 1.2345