THE TAKEAWAY: UK February inflation above expectations -> rising oil prices thought to influence latest reading -> EURGBP falls on the news
Inflation in the UK remains an issue as the Bank of England attempts to aggressively fight economic stagnation with extensive quantitative easing measures. The benchmark yearly consumer price index gauge rose 3.4% versus the 3.3% median forecast by a team of economists. The previous reading was 3.6%. Inflation rose 0.6% on the month, also a greater than expected increase.
A breakdown of the data showed that price gains in alcohol and some foods offset declines in the energy sector. Although the decline in CPI was smaller than had been predicted, today’s reading was in line with recent declining inflation numbers across Europe. The Bank of England has said it expects CPI to drop down to its target 2% rate this year; even so, rising oil prices caused by instability in the Persian gulf threaten to offset declines in CPI, particularly in energy-related fields.
Upon the data’s release, Sterling reversed declines seen against the dollar earlier in today’s session. Cross flows between the Euro, US dollar, and Pound sent EURGBP down 20 points after a multi-hour consolidation intraday.