EUR/GBP rises after UK inflation surprise challenges BoE outlook – Danske Bank
|EUR/GBP ended the day higher following UK inflation data for April surprising significantly to the topside, relative to both consensus and BoE estimate, Danske Bank's FX analysts report.
More cuts in August and November
"Headline came in at 3.5% y/y (cons: 3.3%, prior: 2.6%, BoE: 3.4%) and services at 5.4% y/y (cons: 4.8% , prior: 4.7%, BoE: 5.0%). Akin to PMI data for April, this points to a more cautious cutting cycle from the BoE with more stagflationary tendencies with still elevated price pressures, which we see as GBP negative."
"Additionally, we note that the yearly indexation of a range of services took place in April such as for phone and internet bills. Effects from energy prices, a rise in water bills, a new car road tax and the timing of Easter all lifted the prints yesterday, which makes it trickier for the BoE to gauge underlying price pressures."
"Markets scaled back on the pricing of cuts, pricing just short of 40bp worth of cuts by year-end. We expect two more cuts in August and November."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.