THE TAKEAWAY: UK inflation rises for the first time in six months -> Increased CPI could lower chance for further QE -> Cable rallies towards 1.6000 resistance level
UK inflation rose for the first time in six months as the Consumer Price Index for March came in 0.3% higher than February and climbed 3.5% on the year. The rate of inflation met monthly expectations but came in higher than the expected 3.4% when compared to March 2011. The Office for National Statistics in London released the report.
The numbers partially reflect a rise in food inflation, but are also the results of a rise in core CPI. The rise in CPI goes against the Bank of England’s forecast for a drop in inflation to 2% by year’s end. Today’s report could lower the chances of further quantitative easing measures being implemented at May’s MPC meeting.
Cable rose on the news of the elevated inflation and passed the 1.5950 mark. The pair is up for the day as it comes closer to the five-month resistance level of 1.6065. Sterling also rallied against the Euro after the reported inflation rise.