Pound Shrugs Off UK Inflation Surprise as BoE Rate Hopes Unchanged
The British Pound (GBP) saw little movement in reaction to the UK's July Consumer Price Index (CPI) data, which showed a 2.9% year-over-year increase in headline inflation.
This matches expectations and is up from June's 2.5%. The core CPI rate, excluding volatile components like food and energy, also increased at a steady pace of 2.6%, beating forecasts for a slowdown to 2.5%.
On a monthly basis, the headline CPI rose by 0.35%, in line with expectations and higher than June's reading of 0.1%. The data suggests that UK inflation concerns remain intact, potentially forcing traders to reassess their Bank of England (BoE) interest rate expectations.
TD Securities expects the BoE to hold policy rates at current levels throughout the year, citing a 'steady but lacklustre' labour market performance and easing wage growth. The bank forecasts a drop in headline average weekly earnings growth to 4.0% from May's 4.3%, with ex-bonus wage growth remaining steady at 3.4%.
Meanwhile, the Japanese Yen (JPY) outperformed its major peers after two weeks of underperformance, as markets anticipate a BoJ interest rate hike in September.