THE TAKEAWAY: UK inflation unexpectedly rises in July -> Airfare, clothes and footwear contribute to higher prices -> Sterling slightly higher in today’s session
UK annual inflation rose to 2.6% in July, beating expectations for an annual consumer prices drop of 2.3% following last month’s 2.4% inflation rate. The UK consumer price index rose 0.1% in July, also beating expectations for a third month of declining prices, according to the Office for National Statistics.
The rise in inflation was boosted by prices for airfare, clothes, and footwear. Also, house prices rose 2.3% from a year earlier. The 1.9% drop in clothing prices during July was the least on record for the month. Food prices were up 0.3% for the month, while fuel and light prices rose 0.1%.
The BoE has implied that it will possibly add to its bond purchase target if the economy’s inflation and GDP continue to decline, but today’s inflation makes additional monetary action less likely.
The British Pound temporarily rose against the US Dollar before falling back below 1.5710, by the resistance of a 10-day upward channel line. The next resistance could come around 1.5750, where resistance has been provided since June.
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