Skip to content

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved.

​​​​​Sterling rallies after mixed UK CPI data

While UK inflation slowed markedly in April, providing some cheer for consumers, signs of strength in services pricing has spoiled the party for dovish Monetary Policy Committee members.

Building Source: Getty Images

​​​UK inflation drops sharply

​April’s UK consumer price inflation (CPI) data came in at 2.3% year-on-year (YoY) and 0.3% month-on-month (MoM). This is a sharp drop from the March readings of 3.2% and 0.6% respectively, though it was higher than the expected figures of 2.1% and 0.2%.

​The April data revealed a slower-than-expected decline in price increases. This upward surprise in inflation figures has emerged as a potential obstacle to the recent optimism around a potential June rate cut by the Bank of England (BoE), which was previously seen as a 50/50 prospect. April data proved problematic last year as well, prompting a period of higher inflation that led the BoE to increase its rate hike increments from 25 basis points (bp) to 50 bp at the June 2023 meeting.

​June rate cut off the cards?

​Now, market pricing indicates only a 14% chance of a rate cut in June, with expectations shifting to November for the first reduction rather than August. Apart from the higher-than-anticipated headline and core inflation prints, the UK services inflation figures were the most shocking aspect of the data, surpassing even the highest forecasts for both the yearly and monthly comparisons.

​A fly in the oinment

​The UK inflation rate of 2.3% is now below the G20 average, a position expected to continue through the summer. Although surpassing the 2% target will temporarily delay some political pressures for interest rate cuts, the more concerning data point is the 5.9% YoY increase in services inflation.

​Sterling rallies versus dollar and euro

​The news sent the pound up sharply against the US dollar, toits highest level since the middle of March.

​This move through $1.27 arguably clears the way for a move to the highs of early March towards $1.29, and negates any expectation of a pullback for now unless we see a close back below $1.2650.

GBP/USD Chart Source: ProRealTime
GBP/USD Chart Source: ProRealTime

​Meanwhile, EUR/GBP continued its slump, falling through the April lows. It is now on course for the £0.85 lows seen in February and March, barring a recovery above £0.8550.

EUR/GBP chart Source: ProRealTime
EUR/GBP chart Source: ProRealTime

​FTSE 100 finally knocked off its perch

​The news this morning prompted a sharp drop for the FTSE 100, though some buyers have since emerged.

​A full-blown pullback has yet to develop, with the current price action resembling more of a consolidation than anything more dramatic. That might come with a close below 8300, which might then see the price close some of the gap with the 50-day simple moving average (SMA), currently down at 8064, or 4% away.

FTSE 100 chart Source: ProRealTime
FTSE 100 chart Source: ProRealTime

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Start trading forex today

Trade the largest and most volatile financial market in the world.

  • Spreads start at just 0.6 points on EUR/USD
  • Analyse market movements with our essential selection of charts
  • Speculate from a range of platforms, including on mobile

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.