Trade Desk Thoughts - U.K. CPI

U.K. CPI Actual 5.2%, Expected 5.0%, Previous 4.7%
U.K. Core CPI Actual 2.2%, Expected 2.1%, Previous 2.0%

Release Explanation: The CPI measures the average price of a fixed market basket of goods and services purchased by consumers, and therefore give an overall read of Inflationary pressures. It is the most widely used Inflation indicator of Central Banks, Institutions, and Governments. It is used to calculate cost of living numbers for Government programs. Each regional central bank will have their own CPI target rate, and each will differ in line with the way they individually want to control the aspects of their own economies.

Trade Desk Thoughts: The U.K. Consumer Prices Index rose 5.2% for the month of September from one year earlier, more than market expectations. The Core CPI read, which excludes volatile items, also beat market expectations, rising to 2.2% from one year ago. The largest upward pressure on the CPI came from housing and household services, culture, and clothing. There were also items in the index that recorded declines from one year earlier including second-hand cars, fuels, lubricants, and education. It seems that the trend seen in the last few months in the Euro-area and U.S. CPI, of falling inflation is not materializing in the U.K.

Retail Prices Index (RPI) inflation rose to 5.0 percent in September, up from 4.8 percent in August. The main factors affecting the CPI also affected the RPI

Forex Technical Reaction: Even though the release beat market expectations and showed inflation is still a problem for the central bank, the pound fell 30 pips soon after the release. During the European session, the pair tried to break above the 1.7550 level, however, it has, so far, been unsuccessful. Against the euro and the swissy, the pound strengthened during the overnight session.

Written by TheLFB Trade Team, © 2007-2008 LFB Services, LLC. All rights reserved. http://www.TheLFB-Forex.com

TheLFB Risk Disclaimer can be found at http://www.thelfb-forex.com/content.aspx?id=174.

The Copying, Broadcast, Republication or Redistribution of TheLFB Content is Expressly Prohibited Without the Prior Written Consent of LFB Services, LLC.