U.K. July factory gate prices came in stronger than expected, down just 1.3% y/y (median -1.7%), after -1.0% in June (revised from -1.2%). On the month prices rose 0.3%. Core output prices decelerated to 0.2% y/y from 0.3% in June (revised up from 0.1%), against a median estimate for -0.5%. Meanwhile, input prices fell 1.4% m/m and the y/y rate declined to -12.2% y/y (median -10.7%), versus -11.8% in June (revised from -11.0%). Last year’s higher energy prices are now falling out of the base calculation and weak demand is also placing downward pressure on prices. However, factory gate prices continue to show some stickiness, with earlier commodity price increases likely impacting. Data highlight that deflation risk remains slim.
GBP maintained a heavy footing after July output PPI came in at -1.3% y/y, while core output prices rose 0.2% y/y. Cable traded at an earlier low of 1.6721 and EUR-GBP traded at a peak of 0.8590. Further downside risk remains, with intra-day accounts eyeing stops in Cable under 1.6700 and above 0.8600 via EUR-GBP.