CPI miss buoys the FTSE

Weaker inflation has knocked back the pound, helping the FTSE 100 to rise 8 points in mid-morning trading.

-  UK price growth takes a knock
-  Royal Mail saved by strong international performance
-  US healthcare legislation stopped in its tracks

Early losses for the FTSE have been reversed, thanks to a weaker-than-expected CPI reading. Price growth saw its first drop since April 2016, prompting a sudden drop in a seemingly-unstoppable rally in GBPUSD. Suddenly, the wage squeeze in the UK seems slightly less acute, but the BoE could now be facing a similar problem to the Fed in the US – how to deal with a recovery that is good in parts, such as job growth, but is missing the fundamental ingredient of inflation. While the  bounce in the FTSE will be welcome it still seems like we are at the mercy of currency fluctuations, with little in the way of fundamental news to drive the market higher. The summer drift goes on, with the
 depressing thought that we have weeks of this to go. Royal Mail’s international division came to the rescue of a mixed performance in the UK, and with further progress on cost reduction evident, it looks like the firm has managed to win over investors, with the shares up 3% so far this morning.

US bank earnings dominate the afternoon session, as Bank of America and Goldman Sachs issue their latest figures. US investors will have one eye on this and the other on Washington, as the administration falls into yet another quagmire over its healthcare plans. Turns out that reforming healthcare is not as easy as some thought. A hostile public reception has caused two Republican senators to break ranks, and more could follow. All this comes despite the Republicans’ firm hold on the executive and the legislature; if no progress is possible now, what hope is there if they lose the legislature after the mid-term elections?

Ahead of the open, we expect the Dow to start at 21,643, up 14 points from last night’s close.

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