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Talking Points:

  • The British Pound rose more than 0.2% versus the US Dollar
  • UK’s Core CPI at 1.1%, above expectations
  • Headline CPI unchanged at negative -0.1% year-on-year

The British Pound rose more than 0.2% versus the US Dollar (at the time this report was written) after the UK’s Core Consumer Price Index (CPI) came above expectations, as the reading showed an annual rise of 1.1% percent, above the prior and expected reading of 1.0%. While Core CPI came in stronger, headline CPI dropped -0.1% from a year earlier, as expected by economists, matching the prior reading, with the monthly October figure printing a rise of +0.1%, as expected, with a negative -0.1% prior reading.

Headline inflation remains below the BoE’s 2 percent target. With the number widely regarded as reflecting low energy prices, the market seemed to put more emphasis on the core figure which excludes volatile factors such as food, energy, alcohol, and tobacco. BoE Governor Mark Carney has previously talked about the importance of core inflation as a measure for policy makers for deciding when to begin raising interest rates. With the pickup in Core CPI, the market appeared to have estimated higher probability of a sooner rate hike by the BoE.

GBP/USD Higher on Better Than Expected Core CPI