UK Trade Balance and CPI Could Disappoint

Although the British pound is slightly weaker against the dollar, it has strengthened against the Japanese Yen, Euro, and Swiss Franc. Inflation numbers were moderately stronger than expected with input prices jumping 1.2 percent.

There was a sharp downward revision the prior month which offset some of the surprise. Output prices were right in line with expectations, but core prices grew less than expected. Going into tomorrow?s consumer price release, this does in inject some upside risk, but at the same time, output is more important for CPI than input. We are also looking for a weaker trade balance since the GBP rallied to a high of 2.013 in the month of April.