• UK CPI rises by 9.1% YoY in May vs. 9.1% expected.
  • Monthly UK CPI arrives at 0.7% in May vs. 0.6% expected.
  • GBP/USD drops to daily lows at 1.2217 on mixed UK CPIs.

The UK Consumer Prices Index (CPI) 12-month rate came in at 9.1% in May when compared to 9.0% registered in April while matching estimates of a 9.1% print, the UK Office for National Statistics (ONS) reported on Wednesday. 

The annualized figure hit the highest since March 1982 and is also the highest rate out of the Group of Seven (G7) countries.

Meanwhile, the core inflation gauge (excluding volatile food and energy items) eased to 5.9% YoY last month versus 6.2% booked in April, missing the market forecast of 6.0%.

The monthly figures showed that the UK consumer prices arrived at 0.7% in May vs. 0.6% expectations and 2.5% previous.

FX implications:

In an initial reaction to the mixed UK CPI numbers, the GBP/USD pair fell further to hit a daily low at 1.2217.

The pair was last seen trading at 1.2233, down 0.32% on the day. US dollar rebounds amid broad risk-aversion.

Why UK inflation matters to traders?

The Bank of England is tasked with keeping inflation, as measured by the headline Consumer Price Index (CPI) at around 2%, giving the monthly release its importance. An increase in inflation implies a quicker and sooner increase of interest rates or the reduction of bond-buying by the BOE, which means squeezing the supply of pounds. Conversely, a drop in the pace of price rises indicates looser monetary policy. A higher-than-expected result tends to be GBP bullish.

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