0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Wall Street
Bullish
Gold
Mixed
GBP/USD
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
USD/JPY
Mixed
More View more
Real Time News
  • RT @IGTV: Looking ahead to next week, @JMcQueenFX looks at $NZDCAD and $NZDJPY ahead of next week’s rate decision from the Reserve Bank of…
  • Canadian #Dollar Outlook: $USDCAD Responds to Major Trend Support - https://t.co/4fMIS32WYJ https://t.co/qbC1xYLo6W
  • GBP/USD is close to recovering all of the COVID-19 sell-off seen in March and will need new drivers to push further higher. Get your $GBPUSD market update from @nickcawley1 here: https://t.co/ZTGGMm0vYx https://t.co/RkdBbIUUXT
  • Forex Update: As of 14:00, these are your best and worst performers based on the London trading schedule: 🇯🇵JPY: -0.31% 🇨🇭CHF: -0.46% 🇨🇦CAD: -0.54% 🇪🇺EUR: -0.79% 🇦🇺AUD: -0.84% 🇳🇿NZD: -1.03% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/e0bdKqxsfz
  • Secretary Pompeo says actions on Hong Kong send clear message - BBG
  • Indices Update: As of 14:00, these are your best and worst performers based on the London trading schedule: Germany 30: 0.52% France 40: 0.08% FTSE 100: 0.06% US 500: -0.05% Wall Street: -0.14% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/fho9Xdiw4A
  • $Gold pullback has finally started. Given aggression on the bid this week, could be end of week profit taking after a really big run to fresh all time highs. Picking off support potential going to be a challenge, but a couple of relatively nearby spots of prior res $GC $GLD https://t.co/c76XHAuzHd https://t.co/GKYJ9qKyS7
  • Fed's Rosengren says Main Street program inherently more complex to put in motion - BBG
  • Commodities Update: As of 14:00, these are your best and worst performers based on the London trading schedule: Oil - US Crude: -1.16% Gold: -1.34% Silver: -4.19% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/8S8pnf2A6e
  • The Dollar's rally has offered up some EURUSD range in its well-defined 1.19-1.17 zone, but $GBPUSD has a break within its range shift that could carry more weight into next week https://t.co/jzJTfzcN1n
GBP/USD Spikes Higher on Brexit Induced Inflation Boost

GBP/USD Spikes Higher on Brexit Induced Inflation Boost

2016-08-16 09:45:00
Oded Shimoni, Junior Currency Analyst
Share:

Talking Points:

- The British Pound traded higher versus all other majors, short term outlook here

- Headline CPI prints 0.6% year-on-year versus 0.5% expected

- PPI and RPI data all beat expectations, perhaps due to past depreciation of the Sterling

Learn good trading habits with the “Traits of successful traders” series

The British Pound spiked higher versus all other major currencies after the UK’s Consumer Price Index (CPI) and other price measures printed figures above expectations.

Headline CPI showed an annual rise of 0.6% percent, above the expected and prior reading of 0.5%. The month-on-month figure came in line with expectations by printing -0.1% with a 0.2% prior print.

Core CPI, which excludes volatile factors such as food, energy, alcohol, and tobacco, was the only inflation figure below expectations at 1.3% versus the expected and prior 1.4% print.

Other measures of inflation such as the RPI and PPI all printed better than anticipated numbers.

The data represent the period immediately after the Brexit vote so it could give indications for the initial inflationary environment post-Brexit.

Looking into the report, the Office for National Statistics said that the main contributors to the increase in the rate were rising prices for motor fuels, alcoholic beverages and accommodation services, and a smaller fall in food prices than a year ago, which explains the discrepancy between the headline and core figures.

Other signs of price pressures (such as the better than expected RPI and PPI figures) might be partially explained by the huge depreciation of the British Pound (leading to a significant jump to import costs).

Input costs based on the Producer Price Index Input NSA year-on-year figure rose by 4.3% versus an expected 2.0% rise.

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 could be seen as leaning to the dovish side; this could perhaps explain the jump by the British Pound based on a knee-jerk reflex reaction.

With that said, the BOE announced significant easing measures two weeks ago, and explicitly said that they will look past the anticipated higher inflation post-Brexit as the bank focuses on reducing spare capacity at the cost of higher inflation.

Against this backdrop, the jump by the British Pound appears curious.

Looking at 2-year UK yields at the time of the release, yields saw a jump higher as well, perhaps implying that the market isn’t buying the BOE line saying that will look past higher inflation, or that the acceleration in inflation might suggest that the bank will be limited in its scope to cut rates further or provide further stimulus.

With that said, the central bank did explicitly say that they will look through the higher prints so follow-through on Sterling strength might be limited at the time based on the inflation read alone.

Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing that about 69.8% of traders are long the GBP/USD at the time of writing, on the wrong side of the long term move lower, apparently trying to pick the bottom. The SSI is mainly used as a contrarian indicator implying a short bias.

You can find more info about the DailyFX SSI indicator here.

GBP/USD 5-Minute Chart: August 16, 2016

GBP/USD Spikes Higher on Brexit Induced Inflation Boost

--- Written by Oded Shimoni, Junior Currency Analyst for DailyFX.com

To contact Oded Shimoni, e-mail oshimoni@dailyfx.com

Follow him on Twitter at @OdedShimoni

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.