UK Core Consumer Price Inflation Increases by 1.5% y-o-y in Oct

UK Core Consumer Price Inflation Increases by 1.5% y-o-y in Oct
November 19, 2020


The British Pound gained ground against the greenback yesterday following the release of better-than-anticipated consumer price index and producer price inflation data from the UK. The lower-than-anticipated increase in the US crude oil inventories data also fueled the pound’s rally against the greenback. In the past 24 hours, the GBP/USD pair rose from a low of 1.3240 to a high of 1.3310.

According to the Office for National Statistics, the consumer price index increased 0.7% y-o-y in October, following a rise of 0.5% in the earlier month. Economists had anticipated consumer price inflation to increase by 0.5% in the reported period.

Excluding volatile goods, the core consumer price index rose by 1.5% y-o-y in October, following an increase of 1.3% in September. The consensus estimates called for an increase in the core CPI by 1.3%.

Furthermore, the Consumer Prices Index, including owner-occupiers’ housing costs (CPIH), was 0.9% y-o-y in October, increased from 0.7% in September.  Recreation and culture made the largest contribution of 0.26% to the CPIH 12-month inflation rate. Food, furniture, furnishings, and carpets contributed 0.16%.

The ONS also stated that producer price inflation (PPI) input increased 0.2% m-o-m in October, following an increase of 0.3% in September. Economists had anticipated no increase in inflation in the reported period. Likewise, the PPI output remained unaltered in October, following a drop of 0.1% in the earlier month. The market had anticipated the PPI output to increase 0.1%.

The core output inflation of goods moving out of the factory was -1.4% y-o-y in October, an improvement from -1.7% drop in the earlier month. Likewise, the price for materials and fuels utilized in the manufacturing process recorded a decline of -1.3% y-o-y in October, an improvement from a decrease of -2.2% in the prior month.

In the US, data published by the Census Bureau indicated that building permits were 1, 545,000 units (seasonally adjusted) in October, unchanged from the earlier month, but missed the 1,570,000 units anticipated by economists.  The reported figure is 2.8% above the 1,503,000 units recorded in October 2019.

Nevertheless, privately-owned housing starts were 1,530,000 units (seasonally adjusted) in October, up 4.9% from the amended September figure of 1,459,000 units and 14.2% above the October 2019 level of 1,340,000 units. The market had anticipated housing starts of 1,450,000 units for the reported month.

Likewise, privately-owned housing completions were 1,343,000 units in October, down 4.5% from the amended September level of 1,406,000 units, but 5.4% above the October 2019 level of 1,274,000 units.

According to the data published by the (EIA) Energy Information Administration, crude oil inventories increased 0.80 million barrels for the week which ended on November 14th, 2020, following an increase of 4.30 million barrels in the earlier month, but lower than the 1.70 million barrel rise anticipated by economists.

For the reported period, refineries functioned at 77.4% of their installed capacity. The US crude inventories, barring strategic reserves, were 489.50 million barrels, reflecting an increase of 6% from the same period last year.

The lower than anticipated increase in the US crude oil inventories and robust CPI data from the UK is expected to keep the GBP/USD pair slightly bullish in the near-term.

The GBP/USD pair chart indicates that the currency pair is rising after testing support at 1.3150. The next resistance is anticipated only near 1.3510. Furthermore, the stochastic indicator is in the bullish zone. Therefore, we are expecting the currency pair to remain in an uptrend in the days ahead.

GBP - technical analysis - 19th November 2020

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 prior to trading.


Andrew Wright

Prior to founding in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.

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