The most recent UK CPI print noticed its largest draw back shock in virtually two years. Economists at Commerzbank analyze GBP following inflation knowledge.
UK inflation shock is placing stress on Sterling
British shopper costs rose a lot much less shortly in June than anticipated. The ensuing sturdy market response confirms our expectation that the speed expectations priced in by the market don’t justify sustainable GBP power.
As a substitute, we assume that the Financial institution of England will solely tighten its financial coverage so far as mandatory to regulate inflation expectations. The draw back correction of the speed expectations following Wednesday’s inflation knowledge is due to this fact not far reaching sufficient for us, and we see additional correction potential in the direction of a weaker GBP.