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British Pound (GBP) Price Outlook: GBP/USD Rallying After Hot UK Inflation Data

British Pound (GBP) Price Outlook: GBP/USD Rallying After Hot UK Inflation Data

Martin Essex, MSTA,

GBP price, inflation, news and analysis:

  • UK inflation numbers for June came in above economists’ expectations Wednesday, helping GBP/USD rally after Tuesday’s fall in the wake of US inflation data that also beat forecasts.
  • However, the impact of the UK CPI (consumer price index) numbers has been offset by weaker than predicted UK PPI (producer price index) data that suggest inflation could turn lower soon – a negative for GBP.
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GBP/USD improves after UK inflation data

UK inflation data beat economists’ expectations Wednesday, with the headline consumer price index rising 2.5% year/year in June, above both the previous 2.1% and the predicted 2.2%. That helped strengthen GBP/USD after its drop Tuesday on US inflation numbers that were also well above forecasts.

Source: DailyFX calendar

Check out here how CPI data affect currency prices

However, the impact of the latest statistics was offset by weaker than expected producer price index numbers that suggest CPI inflation could soon fall back as weaker than predicted input costs and factory gate prices work their way into the shops.

The initial response in GBP/USD to the latest statistics was a recovery after the pair’s sharp fall Tuesday on news of hotter than predicted US inflation. However, there could be some limited downside ahead given the PPI data that reopen the debate about whether inflation worldwide is transitory or now embedded in the global economy. On the basis of these numbers the answer could be transitory, in the UK at least.

GBP/USD Price Chart, Ten-Minute Timeframe (July 13-14, 2021)

Source: IG (You can click on it for a larger image)

GBP/USD Mixed
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -12% 7% -2%
Weekly 4% 1% 2%
What does it mean for price action?
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However, the mood could change again. The next UK data release is Thursday’s employment report and if that shows average earnings still galloping ahead it could help GBP/USD higher.

--- Written by Martin Essex, Analyst

Feel free to contact me on Twitter @MartinSEssex

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

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