The most recent data on inflationary pressures in the UK has shown a significant increase, with CPI Y/Y rising to 2.9% for the month of August The rise is slightly above the consensus forecast of a 2.8% increase, and remains well above the Bank of England’s (BoE) 2% target. After seeing the same increase back in May successive declines in the months that followed had many in the markets calling a high-water mark, but today's release suggests there could be further increases ahead.
With BoE rate-setters scheduled to announced their latest monetary policy in just over 48 hours time, today’s release will do little to appease the dissent seen amongst the committee last time out, with two members opposing the decision to keep rates at record lows. It remains highly unlikely that there is any tangible policy shift this Thursday, but should any other MPC member join Mccafferty and Saunders in dissenting then there could be another leg higher seen in the pound.
In terms of market reaction the pound is rising immediately following the release as you would expect, with the GBPUSD now trading within striking distance of its highest level in almost a year. The sterling appreciation has weighed on stocks with the FTSE 100 sliding in recent minutes back towards its lowest level of the day.