Talking Points

- Inflation rises less than expected as input price growth slows.

- Sterling now eyes upcoming central bank talk against a backdrop of increasingly fractious Brexit talks

Check out our new Trading Guides: they’re free and have been updated for the fourth quarter of 2017

Consumer prices rose less than expected in October, according to the latest data from the Office for National Statistics (ONS). GBP/USD fell below 1.31000 on the release with traders now looking ahead to jobs, wages and retail sales numbers over the next two days.

Annual CPI remained unchanged at 3.0%, against expectations of a rise to 3.1%, while CPIH also remained unchanged at 2.8% against expectations of a rise to 2.9%. On a monthly basis, consumer prices fell to 0.1% against a prior reading of 0.3% and expectations of a 0.2% rise.

Commenting on today’s inflation figures, ONS Head of Inflation Mike Prestwood said:

“Inflation remains at a five year high with rising food prices offset by a fall in the cost of fuel.The rise in the cost of raw materials and goods leaving factories both slowed, with crude oil and petroleum prices both increasing less than at this time last year.

Sterling is now likely to trade sideways in the short-term with a raft of heavyweight central bankers speaking today, while various MPC members will be speaking later this week. The British Pound will also be driven by Wednesday’s UK jobs and wages data and Thursday’s retail sales figures, with the latter expected to show a sharp drop-off in consumer spending.

We will be covering the UK jobs and wages data live on Wednesday, November 15 from 09:15am – you can join here.

Chart: GBP/USD Daily Timeframe (July – November 14, 2017)

GBP Falls After UK Inflation Misses Expectations on the Downside

Chart by IG

DailyFX analyst David Song discussed the latest technical outlook for GBP/USD here.

IG Client Sentiment data shows 53.0% of traders are net-long GBP/USD with the ratio of traders long to short at 1.13 to 1. In fact, traders have remained net-long since Nov 01 when GBPUSD traded near 1.32549; price has moved 1.1% lower since then. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBPUSD prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse higher despite the fact traders remain net-long.

Would you like to know the Traits of Successful Traders and how to find the Number One Mistake Traders Make? If so, click here.

--- Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

Follow Nick on Twitter @nickcawley1