Tuesday’s tranche of data for the UK leaves GBP falling amongst its peers.
CPI, PPI output and house prices all produced lower than expected figures in Tuesday’s release of UK data. Subsequently sterling fell immediately against a basket of currencies.
GBPUSD fell 0.43% to 1.491, even though the U.S dollar is weakening, whereas the strength of the euro encouraged by the news of the German Manufacturing PMI figure for March being above expectations at 52.4 versus the forecast of 51.5 and previous figure of 51.1, allowed the euro to gain 0.37% against GBP. The same story was seen for GBPJPY as sterling fell 0.45%, even as the Asian market felt the impact of China’s factory output falling to an 11-month low.
UK annual CPI inflation figure fell to 0.0% below the forecast of 0.1% and the previous 0.3%, which marks the lowest level seen since records started in 1989. The reduction of food and computer prices leveled the Consumer Price Index to 0% change, whilst the Core Consumer Price Index that measures goods and services and excludes food and energy, fell to 1.2% below the forecast of 1.3% and the previous year on year figure for February of 1.4%.
The Office for National Statistics also released the house price index that measures the change in the price of homes. Again, this was down on expectations and previous figures with the actual for March year on year at 8.4% versus expectations of 10.2% and previous figure of 9.8%.
Overall, this spells a better cost of living for UK consumers but put this against the low annual wage growth figure of 1.8% at the start of 2015, and consumers may bring the country into deflation if they decide to wait to purchase on the prospect of items becoming cheaper in time.
The downward pressure on inflation has already been commented on by Bank of England governor Mark Carney who earlier in the month said that a cut in inflation was not expected and in fact would be ‘extremely foolish’ if it was a reaction purely to a lowering in oil prices.
In the run up to May’s national elections, consumers will feel a similar amount of disposable cash but the overall state of inflation will be negative/bearish for GBP.
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