Pound Gains Ground After UK Inflation Data

Market Reviews

Japanese yen and Swiss franc increased today as the recovery in global stock markets slowed again. Both the DAX and the CAC 40 are trading with a decrease, while FTSE is mildly higher. Japanese Nikkei lost 0.65%. Sterling strengthened, as data showed British inflation unexpectedly stayed close to its highest levels in six years in January, firming up investors' bets that the Bank of England will raise interest rates again in May. The pound jumped to as high as $1.3924. The British currency fell to a three-week low against the dollar on Friday after the EU's chief Brexit negotiator Michel Barnier warned a transition deal was far from assured.

Today's numbers showed consumer price inflation (CPI) held at an annual rate of 3.0% in January, unchanged from the month before and above a consensus forecast of 2.9%. Retail price inflation (RPI), which is still used to calculate payments on government bonds, student loans and many commercial contracts, edged down to 4.0% from December's six-year high of 4.1%. Core consumer price inflation - which excludes food, energy, alcohol and tobacco - rose to 2.7% from 2.5%, and services price inflation, which is more sensitive to wage costs, also accelerated. Inflation jumped in Britain after the June 2016 decision by voters to leave the European Union, which hammered the value of the pound and pushed up the cost of imports.

Swiss PPI was unchanged at 1.8% yoy in January. Japanese machine tool orders increased by 48.8% yoy in January. Domestic CGPI rose 2.7% yoy in January. Australia NAB business confidence grew by 2 points to 12 in January, hitting a 9-month high. Business condition index rose 6 points to 19.