The pound sterling on the rise: British inflation disappoints

The pound sterling on the rise: British inflation disappoints
The pound sterling on the rise: British inflation disappoints

(AOF) – The British currency gained 0.20% to 1.1734 euros after rising to 1.1749 euros in the morning. It is supported by the publication of a weaker than expected slowdown in British inflation. On an annual basis, in the United Kingdom, consumer prices increased by 2.3% in April after an increase of 3.2% in March. Inflation was expected at 2.1%. Excluding the volatile elements of energy and food, consumer prices increased by 3.9% in April, compared with a consensus of 3.6% and an increase of 4.2% in March. .

“The surprise relative to our forecasts came entirely from services inflation, which reached 5.9% year-on-year, only 10 basis points lower than March’s 6%, and well above the consensus and Bank of England (BoE) expectations”, or 5.4% and 5.5% respectively, explains Barclays.

“Given the scale and general nature of the disappointment, we believe it is now unlikely that a majority of the Monetary Policy Committee will have sufficient confidence in the disinflation process to lower the interest rate by June,” warns the economist.

MUFG says rates markets now price in a slightly less than 50/50 chance of seeing the BoE’s first rate cut at the August Monetary Policy Committee meeting and for the full calendar year , they now only include a 38 basis point drop. For the specialist, a later start to the BoE rate reduction cycle and the still high yields offered in the United Kingdom will favor a rise in the pound in the short term.

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