Falling for 2 consecutive months for the first time since mid-2015, March’s UK inflation reading came in a sterling-shaking one year low of 2.5% this Wednesday.
Though great news for the UK’s under pressure consumers, that CPI decline knocked the wind out of sterling’s sails, causing clouds of doubt about the Bank of England’s rate hike intentions in May to flash across the currency. Against both the dollar and the euro sterling plunged 0.6%, a response likely made sharper by its peacocking performance in the first half of April; cable fell back below $1.42 for the first time in almost a week, while against its single currency rival the pound slid towards €1.148.
Showing that the long-dormant negative correlation between the FTSE and pound has arguably returned, the UK index leapt higher in the face of sterling’s slide. Climbing half a percent, the FTSE spent the session tickling 7280, further reclaiming the ground lost during Monday’s oil- and pound-pummelled trading.
The UK wasn’t the only region dealing with inflation data this Wednesday. The eurozone also had its final glimpse at March’s reading, coming in at a worse than forecast, but still improving, 1.3%. However, with sterling grabbing all the forex headlines there was little reaction to this disappointment, with the CAC and DAX up and down 0.1% respectively.
Turning to the afternoon and following Tuesday’s rocket-strapped showing the Dow Jones is set for a more staid start when the bell rings on Wall Street. The Dow is expected to open effectively unchanged, with little beyond the latest crude oil inventories to cause the needle to move.
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