The pound strengthened against the greenback yesterday following the release of slightly higher-than-anticipated annual inflation data for September. The US economic data was mixed. The UK’s inflation data has given rise to expectations for another rate hike in the upcoming policy meeting. This enabled the pound to strengthen against the greenback. Overall, the GBP/USD pair rallied from a low of 1.2158 to a high of 1.2210 in the past 24 hours.
The UK Office for National Statistics (ONS) stated that the country’s consumer prices index rose by 6.70% y-o-y in September and matched the increase in August. Economists had anticipated an annual inflation rate of 6.60%. The reported figure reflects an 18-month low level.
Food and non-alcoholic beverages rose by 12.10% y-o-y in September. Likewise, furniture and household goods grew by 3.70%. Energy costs inched down 0.20%.
On a m-o-m basis, the UK’s inflation inched up 0.50% in September, reflecting the steep rise in May.
Excluding energy, food, alcohol, and tobacco, the UK’s core CPI inched down to 6.10% y-o-y in September from 6.20% in August but missed forecasts of 6%. The reported reading reflects the lowest core inflation rate since January but is slightly higher than forecasts of 6%. The CPI goods annual rate inched down to 6.20% in September from 6.30% in August. However, the CPI services annual rate inched up from 6.80% to 6.90%.
Notably, both CPI and core CPI remain considerably higher than the Bank of England’s targeted level of 2%.
In a separate news release, the UK’s ONS stated that producer price input inched up 0.40%m-o-m in September following a similar increase in the previous month but missed forecasts of 0.80% growth.
Furthermore, producer input prices declined by 2.60% y-o-y in September, down from a decrease of 2% in August.
The ONS also stated that the UK’s PPI output grew by 0.40%m-o-m in September following a 0.20% increase in August, a notch higher than forecasts of 0.30%.
Also, producer output prices declined by 0.10% y-o-y in September, following a decline of 0.40% in August.
According to the data published by the US Census Bureau, the country’s building permits declined to 1,473,000 units in September from 1,541,000 units in August but surpassed forecasts of 1.45 million units.
The reported figure is 7.20% below the September 2022 rate of 1,588,000 units. Single-family authorizations were 965,000 units in September, up 1.80% from 948,000 units in August.
The Census Bureau also stated that housing starts increased to 1,358,000 units in September from 1,269,000 units in the previous month but missed forecasts of 1.39 million units. The reported figure is 7.20% lower than the 1,463,000 units reported in September 2022.
Single-family housing starts were 963,000 units in September, an increase of 3.20% above 933,000 units in August.
The higher inflation rate in the UK is expected to encourage market participants to bet on another rate hike by the Bank of England in the upcoming policy meeting. This will strengthen the pound against its rivals, including the US dollar.
Technically, the GBP/USD pair is ascending after testing the support at 1.2135. The next resistance is anticipated only near 1.2400. Additionally, the currency pair is trading above its 50-day moving average, while the MACD indicator is showing a positive reading. Therefore, we anticipate the GBP/USD pair to remain in an uptrend in the near term.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies before trading.
