UK inflation expectations continue to soar, adding to the argument for a BoE rate hike and strengthening the pound sterling's foundation.
Pound sterling continues to strengthen its position in trading on Wednesday (17/November), following the release of UK inflation data which is fairly fantastic.
GBP/USD rose limited to the 1.3470s range, while EUR/GBP plunged to new record lows this year.
UK inflation expectations continue to soar, adding to the argument for a BoE rate hike and strengthening sterling's foundation.
The UK Office for National Statistics (ONS) reports that the inflation rate increased from 3.1 percent to 4.2 percent (Year-on-Year) in October 2021.
The rate exceeded the consensus estimate of 3.9 percent, and was the fastest increase in inflation in a decade.
"Inflation rates will continue to worsen in the months ahead, as supply remains tight, demand remains high, and the underlying effect is technically pushing inflation rates higher," said Dan Boardman-Weston of BRI Wealth Management. of England (BoE) to raise interest rates, which we think they will have to do in the next few months due to high inflation and a resilient labor market."
The two main factors that trigger the surge in inflation are rising energy prices and global supply disruptions.
Utility bills increased 11.9 percent (Month-over-Month), food prices rose 1.3 percent, while fuel prices soared 17.8 percent.
Core inflation (inflation data that excludes food and energy prices) also experienced rapid growth due to an increase in VAT from 5.0 percent to 12.5 percent on October 1 following the end of the government's tax relief program.
Economists' consensus forecast was for a 3.1 percent rise in core inflation in October, but actual data showed a 3.4 percent (Year-on-Year) increase.
Money market data shows that traders maintain a 60% probability of a 15 basis point BoE rate hike on December 16, 2021, the same as the probability level following yesterday's release of the UK unemployment rate data.
Similarly, the probability of a rate hike in February 2022 holds at 100%.
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