(menafn – ecpulse)
The United Kingdom released inflation-linked data today, which showed that prices continued the downside movement in February, where inflation started to ease after reaching in September the historical record of 5.2%, affected by the global slowdown and the slower economic activity and most importantly due to the spending cuts adopted by the British authorities.
The monthly Consumer Price Index (CPI) expanded 0.6% from the previous drop of 0.5%; however, the annual index retreated again to 3.4%, the lowest record since November 2010, from 3.6%, missing median estimates of 3.3%. In addition, the annual core CPI index also retreated in a slower than expected pace to 2.4% from 2.6%.
Furthermore, the Retail Price Index (RPI), also unknown as the cost of living index, expanded over monthly basis by 0.8% as well, but on the other hand the annual RPI index also slowed this month, reaching 3.7% from 3.9%.
Inflation was projected to drop further this month; however, rising alcohol and food prices compensated somehow some of the decline seen in electricity and gas costs. But in general, the National Statistics Office said today that the largest downside pressures on inflation were driven from household services. On the other hand, the significant upside pressures were driven by tobacco and alcohol prices.
The Bank of England projects inflation to drop over the medium-term with possibilities it will undershoot the 2.0% target. However, markets fear that the downside movement of prices could be affected significantly by rising oil and energy prices, the main factor driving inflation currently.
The Royal Currency recovered some of the losses incurred versus the U.S. dollar, where the pound gained slight momentum on the inflation data. The GBP/USD pair is currently trading around 1.5863, up from the lowest level recorded at 1.5835.
The sterling pound appreciated sharply in January; however from February until now the currency is almost moving within a sideway range affected by eased inflation and on speculation the Bank of England will not add more easing now.
As of 05:21 EST, the British FTSE was 0.57% or 33.93 point lower, trading around 5927.18 points, led by the basic material sector which shed so far 2.26%. On the other hand, the telecommunications sector added 1.45%.