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GBP/USD Plunges After UK CPI Grows At Slowest Pace Since October 2009

GBP/USD Plunges After UK CPI Grows At Slowest Pace Since October 2009

Edward Hyon,

Talking Point:

  • U.K’s CPI (YoY) Slowed to 1.5% in May vs 1.8% in April; 1.7% Est.
  • U.K’s CPI (MoM) Slowed to -0.1% in May vs 0.4% in April; 0.2% Est.
  • GBP/USD Plunged As Soft Inflation Undermines BOE Policy Action

Want to trade with proprietary strategies developed by FXCM? Find out how here.

UK Consumer Price Index (CPI) came in at 1.5 percent year-on-year for the month of May, which was down from 1.8 percent in the previous month. It missed economists’ expectations for 1.7 percent increase and was the slowest pace of growth in inflation gauge since October 2009. Meanwhile, month-on-month CPI registered -0.1 percent and missed analysts’ expectations for a 0.2 percent increase.

Following the data release, GBP/USD plunged by close to 40 pips to trade at 1.6944, compared to 1.6977 ahead of the figures. According to DailyFX Currency Analyst David Song, a soft inflation reading may limit the Bank of England’s (BoE) scope to normalize monetary policy sooner rather than later, which may help explain the drop in the Pound.

From a technical perspective, support for GBP/USD rests at 1.6897,while resistance looms overhead near 1.6960.

GBP/USD 5 Minute Chart

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Chart Created Using FXCM Marketscope 2.0

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Edward Hyon, DailyFX Research Team

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