Talking Points:
- The British Pound was little changed versus the US Dollar
- UK’s Core CPI at 1.2%, below expectations
- Headline CPI prints 0.3% year-on-year versus 0.4% expected
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The British Pound was little changed versus the US Dollar (at the time this report was written), after the UK’s Consumer Price Index (CPI) printed figures below expectations.
Headline CPI showed an annual rise of 0.3% percent, below the expected reading of 0.4%, unchanged from the prior print. The month on month figure came below expectations as well by printing 0.2% versus the expected figure of 0.3%, but was above the prior 0.1%.
Core CPI, which excludes volatile factors such as food, energy, alcohol, and tobacco, was unchanged at 1.2% versus the expected 1.3% print.
Looking into the report, the Office for National Statistics said that rises in transport costs, restaurant, hotel bills and telecommunication services were the main upward contributors to change in the rate, but were offset by falls in the price of clothing, food, games, toys and hobbies.
CPI readings are a key measure for the BoE in deciding appropriate monetary policy. In “normal” trading conditions, higher CPI readings could have been interpreted as contributing to a more hawkish BoE outlook, while a miss to expectations as contributing to a more dovish view. With that being said, the market seems to focus on the upcoming EU Referendum, with the GBP/USD fluctuating aggressively on “Brexit” polls. Taking this into consideration might explain why the British Pound was little changed versus the US Dollar.
Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing that about 66.2% of traders are long the GBP/USD at the time of writing suggesting that traders might be trying to pick the bottom in the pair. The SSI is mainly used as a contrarian indicator, implying further weakness ahead
You can find more info about the DailyFX SSI indicator here.
GBP/USD 5-Minute Chart: June 14, 2016
--- Written by Oded Shimoni, Junior Currency Analyst for DailyFX.com
To contact Oded Shimoni, e-mail oshimoni@DailyFX.com
