UK Inflation Unexpectedly Holds Steady As Pound Drop Unwinds

GETTY    
   RISE UP The pound to euro exchange rate is picking

GETTY RISE UP The pound to euro exchange rate is picking

GBP Boosted by Stronger than Expected Wages After tumbling in reaction to Tuesday's UK Consumer Price Index (CPI) results, the Pound finally gained some solid ground as investors digested a surprisingly strong UK job market report from June. The BoE is next due to make a decision on interest rates next month, after more than a decade without an increase in the aftermath of the financial crisis. Deflation is the opposite - price decreases over time - but inflation is far more common.

A relatively new phenomenon, inflation has become a real worry for governments since the 1960s. The eurozone economy is in a better position than it has been for years.

On the other hand, pensioners, who depend on a fixed income, watch the value of their assets erode. The prices factories charge for goods rose at the slowest rate since December at 3.2 percent.

LEAP The pound to euro exchange rate saw a boost this morning
LEAP The pound to euro exchange rate saw a boost this morning

Thank you for your feedback. On the whole, the data come in as expected CPI for July at 1.3%, year-over-year, and -0.5%, month-over-month. There will need to be a series of stronger than expected United Kingdom data releases to trigger a more substantial shift in sentiment with GBP/USD unlikely to make significant headway in the near term, especially with a firmer US dollar tone. The market was positioned for a bit more inflation than we're getting. The pair now trends closer to the week's opening level of 0.9089. However, as a major importer of food and raw materials it also drives up costs for businesses and households inside the country.

The first half of 2017 the UK's economy saw the lowest growth rate in the European Union, with inflation well above the 2% target as the price of imported food and energy has been eating into purchasing power.

Earlier today, Eurostat released July's inflation figures for the Eurozone. Consumer prices in the United Kingdom have moved rapidly higher since the Brexit referendum in June past year, as the drop in sterling has made imported products more expensive.

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The July inflation data is significant because it shows higher costs for consumers outstripping expected growth in pay, which the BoE has said could be hindered by uncertainty over Brexit harming companies' willingness to raise wages.

Britain's labor market outperformed tepid growth in the rest of the economy in the second quarter as the unemployment rate unexpectedly fell to its lowest since 1975, official data showed on Wednesday.

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