Lower UK PPI Proves Helpful to the Pound

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UK Output prices fell to their lowest level since 2009 as decline in oil prices continued to ease inflation concerns. UK PPI Output declined by -0.4% versus -0.2% eyed on a month over month basis while UK PPI Inputs tumbled to -2.2% versus -2.1% the month prior.

As the decline in in energy costs continues UK is finally able to lower its chronically high inflation rate allowing the Bank of England more maneuverability on the monetary front. In two weeks UK will report its CPI data and given the sharp pullback in wholesale prices it is likely that consumer inflation will decline below the key 3% level in June.

Cable responded well to the news rising about 30 points in the aftermath of the release to1.5550 as currency traders welcomed the decline in price pressures which would allow the MPC to follow its accommodative monetary policy unimpeded helping risk appetite. Overall however, trading remains muted as markets await the NFP release later in the day and cable will likely mark time at these levels until the North American open.

Boris Schlossberg
Managing Director

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