Pound jumps on CPI figures

14 December, 2016

The British pound is trading higher today against its US counterpart after a raft of local data hit the market above expectations. At 3.21pm (GMT) the British currency was trading at US$1.2705 up from US$1.2670 in yesterday’s trading.

Consumer price index figures released earlier today showed that inflation jumped 0.2 last month, while the yearly figure hit the market at 1.3 percent against analysts’ expectations for a number of 1.2 percent.

It was also well above the previous month’s figure of 0.9 percent pushing it to a 2 year high.

The main drivers of inflation last month were petrol prices and clothing which hit consumers, but at the same time brought some relief to some other sectors of the economy,

 “November’s slight rally in the value of sterling eased the inflationary pressure on businesses importing raw materials but consumer prices continued to edge upwards, due mainly to the rising cost of clothing and fuel.” noted Mike Prestwood of the ONS said:

If the CPI rate continues to grow at this pace, consumers will be forced to cut back on spending which will ultimately cap the rally of the British pound,

"It looks inevitable that consumer purchasing power will deteriorate markedly over the coming months as inflation moves appreciably higher and earnings growth is limited," said Howard Archer, chief UK and European economist at IHS Global Insight


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