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U.K. CPI Actual 2.3%, Expected 2.4%, Previous 2.9%

U.K. Core CPI Actual 1.5%, Expected 1.7%, Previous 1.7%

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,” TheLFB-Forex.com Trade Team said.

TheLFB-Forex.com Trade Desk Thoughts: The U.K. Consumer Price Index declined in April to 2.3%, from 2.9% one month earlier. Additionally, the Core CPI, which excludes volatile items, declined for the first time in the last five months in April, down to 1.5%.

“To some extent, the CPI number does not justify the BoE’s concern of undershooting the inflation target. The core CPI and the CPI numbers are much higher than in other major economies, such as the U.S, Europe and Switzerland and considerable above the BoE’s forecasts” TheLFB-Forex.com Trade Team said. 

The largest downward pressure affecting the change in the CPI annual rate was from housing and household services. This was principally due to electricity and gas bills which fell this year but rose a year ago. A large upward pressure affecting the change in the CPI annual rate contribution came from transport costs due to purchase of vehicles, fuels and lubricants, and air transport.

Retail Prices Index (RPI) inflation slowed to -1.2% in April, down from -0.4% in March. The main factors affecting the CPI also affected the RPI.

Forex Technical Reaction: The pound rose 40 pips after the news release, briefly touching TheLFB R2 (1.5500). Since the Asian session began, the pound has gained 150 pips, reaching the highest value since December 2008.

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