UK Inflation Rate Softens from 8.7% to 7.9% in June

Highlights

• UK Inflation Figures for June garnered interest this morning.
• The UK annual inflation rate softened from 8.7% to 7.9%, easing pressure on the BoE to push interest rates toward 7%.
• However, the inflation numbers leave the threat of a BoE-fueled UK economic recession.

It was a busy morning on the UK economic calendar, with the UK inflation report in the spotlight.

The UK annual inflation rate softened from 8.7% to 7.9% in June. Consumer prices increased by 0.1% from May to June versus 0.7% in May. Economists forecast consumer prices to rise by 0.4% month-on-month and for an annual inflation rate of 8.2%.

According to the Office for National Statistics,

• The consumer price index, including owner occupiers’ housing costs (CPIH), increased by 7.3% year-over-year versus 7.9% in May.
• Declining motor fuel prices were the largest downward contributor to the softer inflation numbers, falling by 22.7% year-over-year compared with a 13.1% decline in May.
• Importantly, there were no large offsetting upward contributions to the annual inflation rate.
• The Core CPIH (excluding energy, food, alcohol, and tobacco) rose 6.4% year-over-year, down from 6.5% in May.

After the hotter-than-expected UK wage growth and better-than-expected GDP numbers, today’s CPI Report could support less hawkish bets on peak interest rates, but leave the BoE on track for further rate hikes and a UK economic recession on the table.

GBP to USD Reaction to UK Inflation Report

Ahead of the UK Inflation Report, the GBP to USD rose to an early high of $1.30448 before falling to a pre-stat low of $1.30130.

However, in response to the UK inflation report, the GBP to USD rose to a post-stat high of $1.30346 before sliding to a low of $1.29387.

This morning, the GBP to USD was down 0.68% to $1.29473.

Up Next

Investors should monitor Bank of England chatter with UK inflation in the spotlight. Monetary Policy Committee member Dave Ramsden is on the calendar to speak today. However, investors should also monitor comments to the media to influence.

The US Session

It is a relatively busy day on the US economic calendar, with the US housing sector in the spotlight. Prelim building permits and housing start numbers for June will draw interest.

A continued uptrend in permits and starts would signal optimism among home builders and strong home buyer demand. Upbeat numbers would support the theory of a soft landing despite the disappointing US retail sales and industrial production numbers. The housing sector is a litmus test of the US economy.