GBP/USD at 1-Year High as UK CPI Remains at 2%

07/17/2024

1 minute read

2024.07.17 07:27

The continues to roll and is up for a sixth straight day. GBP/USD is trading at 1.3038 in the European session, up 0.51% on the day. The pound has sparkled in July, climbing 3% and hitting its highest level since July 2023.

UK Inflation Unchanged

UK remained at 2% YoY in July, unchanged from June. This was higher than the market estimate of 1.9%, but it’s hard to complain when inflation is at the BoE’s 2% target for two months running.

Monthly, dipped to 0.1%, down from 0.3% a month earlier and matching the market estimate.

rose 3.5% YoY, unchanged from June and matching the market estimate. Monthly dropped from 0.5% to 0.2%, below the market estimate of 0.1%.

The inflation report was positive, and the pound responded by extending its impressive July rally. The fly in the ointment was services inflation, which the Bank of England watches keenly for signs of domestic inflationary pressure. Services inflation has been an outlier and was unchanged at 5.7% in July.

How will the BoE view the inflation report? Overall, the release was positive, but services inflation is almost three times higher than the 2% target, which is a concern for policy makers.

The cash rate is currently at 5.25%, unchanged since August 2023, when inflation was 7.9%. There is pressure on the BoE to provide relief and hit the rate-cut trigger but the central bank may lack the confidence to make a move at the next meeting on August 1.

The remainder of the week will be busy, with the UK releasing the employment report on Thursday and retail sales on Friday. GBP/USD-4-Hour Chart