- Inflation in the UK hits a 30-year peak underlying the need for additional rate hikes.
- Sterling little changed as geopolitical news remains in charge of market direction.
Price pressures in the UK continue to increase, according to the latest data released by the Office for National Statistics (ONS) with core inflation y/y rising to 4.4% in January, an increase of 0.2% from December, while headline inflation rose by 5.5% in the 12 months to January 2022, up from 5.4% last month. This is the highest CPI level since the series began in 1992. The closely watched Consumer Prices including occupier’s housing costs (CPIH) rose by 4.9% from 4.8% in December. The CPIH reading is the highest recorded inflation rate since the series began in January 2006.
Today’s inflation report will give the Bank of England hawks more fuel to raise interest rates by 50 basis points at the March MPC meeting, especially after Tuesday’s robust UK jobs and earnings report.
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Sterling is little changed in early European trade against the US dollar as traders remain focussed on the events in Ukraine. While the situation seems to have improved over the last 24 hours, with some Russian troops begin withdrawn from the Ukrainian border, fears still remain that the situation could change quickly.
Cable is trading around 1.3560 and is close to initial short-term resistance at 1.3572. Above here, 1.3610 comes into play ahead of the 1.3645 three-week high.
GBP/USD Daily Price Chart – February 16, 2022
Retail trader data show 51.05% of traders are net-long with the ratio of traders long to short at 1.04 to 1. The number of traders net-long is 0.96% lower than yesterday and 14.88% lower from last week, while the number of traders net-short is 1.46% higher than yesterday and 5.43% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current GBP/USD price trend may soon reverse higher despite the fact traders remain net-long.
What is your view on GBP/USD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.