UK CPI beats expectations

GBP - CPI y/y: 2.3%
ALL - G7 Meetings
GBP - PPI Input m/m: 0.4%

UK inflation was yesterday’s main focus. UK consumer price index posted its highest level since October 2013 at 2.3%, exceeding economists’ consensus. There is a now a strong case starting to build for the Bank of England to raise rates sooner than initially thought, as prices near a four-year high. However, on the other side of the coin, inflation is moving away from the central bank’s target of 2%. If this surge in prices continue it is inevitable that inflationary pressures will appear, once again.

It is important to remember; unemployment is close to 40-year lows and household earnings have accelerated in the six months after June’s referendum. With CPI already having edged up to 2.3 per cent, and expected to rise further this year, the Bank could easily justify raising base rates, once the all-important wage growth box has been ticked.

In Canada, the Trans Alaska Pipeline System is facing potential issues as the oil production in the country has declined. Built to face extreme conditions, the operators are now worrying the line might become unusable with the reduction of oil passing through it, potentially cutting off hundreds of the North Slope oil wells. Since the news, the Loonie has strengthened across the majority of its counter parties as the Canadian Dollar is a commodity driven currency.

GBP - Average Earnings Index 3m/y: 2.3%
CAD - BOC Monetary Policy Report
USD - Crude Oil Inventories

The UK’s average earning index will be released today, expected at 2.1%. It has posted a worse than expected figure the last two months, so if this follows suit we could see a weaker Sterling today. Also from the UK, the unemployment rate is released, expected at 4.7%. As the figure has seen little change in the last few months, it is unlikely to be a market mover.