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 Price Index moved higher in February, to 3.2%, from 3.0% one month earlier. Even though the CPI declined at a record pace last month, this month the inflation gauge rose. In addition, the Core CPI, which excludes volatile items, rose to 1.6% from 1.3% last month. To some extent, the CPI number does not justify the BoE’s concern of “undershooting” the inflation target.
The largest upward pressure on the CPI annual rate came from food and non-alcoholic beverages. The effect was widespread but the largest individual factor was the price of vegetables, which rose by more than a year ago. The only large downward pressure on the CPI annual rate came from housing and household services
Retail Prices Index (RPI) inflation slowed to 0.0% in February, down from 0.1% in January. The main factors affecting the CPI also affected the RPI.
Forex Technical Reaction: The pound strengthened both in the Asian and European sessions, gaining more than 200 pips since the new trading day began. Following the release the cable added another 50 pips.