UK Inflation meets expectations

17 January, 2018

Rob Bastin

Yesterday’s trading saw the first major data released in the UK this month, namely the latest headline inflation figures from December. In November inflation peaked at 3.1% on the year, triggering a letter of explanation to the chancellor from the Bank of England. The Bank of England has however maintained for some time that inflation will naturally come back down after going over 3%, as levels were being affected by both fuel prices and the weakness in Sterling. Despite this, the BoE did move to raise rates back in November to help curb this rise, and December’s figures confirmed a drop back to 3%. Consumers will be pleased to hear this, but for the markets, this will likely extend expectations of the next rate hike from the BoE, currently forecast for Q4 of 2018.

With data meeting expectations, the pound had another stable day trading with very little change against the Euro or US Dollar. For those waiting and hoping for any bigger changes in rates, you could be waiting a lot longer with Sterling markets very much in consolidation mode, particularly against the Euro. Today it is the Euro-zone’s turn to produce their latest inflation data at 10 am, with a no change 1.4% annual figure expected by analysts. The afternoon is very much dominated by Loonie news, with the latest interest decision for Canada at 3 pm. The greenback may see some volatility this evening with the Fed’s beige book out at 7 pm and a couple of Fed and FOMC speeches later at 8 pm.