In today’s briefing:
- UK: CPI and BOE Review
- FX Weekly Strategy: September 23rd-27th
UK: CPI and BOE Review
- The July CPI was notable for the clear and larger-than-expected fall in services inflation, driven by a fall in restaurant/hotel inflation. This is a bellwether indicator of price persistence.
- The August data showed mixed signs on such a basis. Indeed, services inflation rose back 0.4 ppt to 5.6%, up from a two-year low but still below the BoE projection.
- Indeed, the core would have fallen below 3% without airfares. Moreover, restaurant inflation hit a new cycle low amid generally softer price pressures in which eight (of 12) CPI components fell.
FX Weekly Strategy: September 23rd-27th
- Focus on PMIs to confirm more risk positive market tone. Some downside risks in Europe, particularly the UK. JPY weakness over the last week should fade.
- The week starts with the preliminary PMI data for September. Despite a dip on Friday, the equity market showed a generally risk positive tone through the week.
- This was helped by a confident tone to the FOMC statement which foresaw only a modest slowdown with unemployment peaking at 4.4% and inflation under control.
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