GBP looks stronger than USD thanks to inflation
July 17, 2024 @ 14:18 +03:00
A batch of inflation statistics from the UK seems to have fuelled the Pound’s rally against the Dollar and Euro, which has been going strong since the beginning of the month.
![](https://fxpro.news/wp-content/uploads/2024/07/uk_cpi_240717.png)
Consumer inflation remained at 2.0%, with the core index at 3.5% y/y. At the same time, positive monthly price trends persisted, adding 0.1% in June versus a commensurate decline in the US. Inflationary processes in the UK look livelier than in the US.
The day before, markets were roughly evenly pricing in the chances of a rate cut on 1 August. Judging by the market reaction, traders are now inclined to extend the pause, expecting the easing cycle to start in September.
![](https://fxpro.news/wp-content/uploads/2024/07/uk_ppi_240717.png)
At the same time, we continue to pay attention to disinflationary developments at the producer price level. The Input PPI lost 0.8% in June after a 0.6% decline in May. On a year-over-year basis, it has remained in negative territory for the past 13 months. The Output PPI fell 0.3% in June (the first drop since May 2023). Its growth rate has slowed from 1.7% to 1.4%.
However, it’s easy to spot how inflation builds up as goods move to UK consumers, from a 0.3% fall in Input PPI to a 1.4% rise in Output PPI, to 2% for CPI and 2.9% for Retail Prices Index.
![](https://fxpro.news/wp-content/uploads/2024/07/gbpusdweekly_240717.png)
Housing prices also showed a jump in growth rate. According to an estimate released today, house price growth accelerated to 2.3% y/y in May from 1.3% a month earlier. According to the index, home values are now 1.2% below their peak of two years ago.
Technically, GBPUSD is enjoying gains, having made a breakout of important resistance. With a strong move last week, it managed to break above the 200-week average, and earlier this year, we saw a break above the resistance of the long-term downtrend channel. That is, the GBP broke the downward trend against the USD since 2008. This sets GBPUSD up for a return to the 2021 cyclical highs at 1.37-1.42 before the end of the year.
The FxPro Analyst Team