U.K. CPI Actual 3.1%, Expected 2.6%, Previous 4.1%
U.K. Core CPI Actual 1.1%, Expected 1.4%, 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 fell in December to 3.1%, from 4.1% one month earlier. The CPI's decline of 1% is a record, even though it is below the market's expectations. The Core CPI read, which excludes volatile items, fell to 1.1%, more than market expectations.
Holiday Season discounts and a lower VAT rate dragged the CPI read lower in December. The largest downward contribution came from the clothing and footwear sub index, however, gas again saw a considerable decline. Out of the 12 sub-indexes, eight had large contributions to the CPI's slowdown, including recreation and culture, furniture, household equipment and maintenance and communications.
RPI inflation slowed to 0.9% in December, down from 3.0% in November. The main factors affecting the CPI also affected the RPI
Forex Technical Reaction: The pound plunged more than 400 pips tonight as the U.K. financial system almost froze. The pair fell near the lowest value reached since 2001.