The pinnacle for UK event risk this week was seen in this morning’s consumer inflation data. The sterling’s long-term bull run was put into jeopardy two weeks ago when the Monetary Policy Committee lowered the overnight lending rate by a quarter of a percent to 5.50 percent. However, major support in GBPUSD has held up under expectations that the BoE’s cut was a one off and the Fed’s policy bias was firmly set for further easing in the months ahead. Such speculation was supported last week by the output component of the PPI reading for November which accelerated to its fastest annual pace of growth in 16 years. This pass through in upstream price pressures clearly did not materialize in the consumer price index numbers though. According to the ONS data, headline inflation pressures actually held steady at 2.1 percent over the year through November. At the same time, the core gauge cooled to 1.4 percent clip to match the weakest reading in 14 months. Looking ahead to tomorrow, pound-centric risk will revolve around the BoE’s minutes from the December 6th rate decision.
[I]Written By: John Kicklighter, Currency Analyst for DailyFX.com[/I]