UK CPI data due at 9.30 GMT

If his Royal Carneyness is to be believed, inflation should be peaking. That’s been the message from the BOE, that inflation would peak into the end of 2017. Well, today’s report is for December so in theory, if it does rise, that’ll be it.

We’re expecting CPI in at 3.0% from 3.1% prior y/y, so the market is already thinking it’s peaked. Core is forecast at 2.6% vs 2.7% prior y/y.

The BOE will have a little wriggle room whatever the result, unless we see a strong gain. Even if inflation falls, it’s still only likely to be temporary as oil price rises are starting to filter through into what we pay at the pumps. A lot is often made of the offset in currencies on things like oil and energy but in this country, we don’t ever see the benefit of that. If wholesale prices go up, so do the bills, irrespective of whether there’s really minimal price changes to energy companies because of currency moves making those imports cheaper (or not changing the effective price at all). It’s just extra margin banked for the energy firms.

We’ve probably got a couple of months before we see the recent oil price rises filter through to the underlying inflation numbers so that’s something to look forward too. The Carney peak is what we’re looking to trade here. Higher CPI by a pip or two probably won’t see much reaction. Anything more and the pound will likely gain as traders think that the BOE has got it wrong. If CPI comes in less (again 2pp or less) we won’t do much. Anything more the quid could dip further but I’m not expecting much.

With the market a bit more stable now, look to the big figures for trading opportunities.

Ryan Littlestone

Psychedelic chartist extraordinaire. Have your shades ready.
Philosophy: “Don’t be a Dick for a tick”

Read how Ryan got into trading here
Ryan Littlestone

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