- Focus on CPI and PPI data despite BoE acknowledgment of higher inflation outlook
- EUR/GBP[1] attempting to hold above 0.85 whilst GBP/USD[2] avoids falling below 1.38
It hasn’t been the best week for Sterling overall and focus next week is likely to shift towards inflation data for the UK out on Wednesday. The yearly July CPI figure is expected to come in a little softer than last month at 2.3%, which would be the first drop since March this year, whilst the monthly reading is expected to come in at 0.3%, down from 0.5%, and it would be the second month with a weaker reading if confirmed. The core CPI reading is expected to come in at 2.2% year on year.
Economic calendar provided by dailyfx.com[3]
The Producer Price index (PPI) for July will also be released on the same day, and I would expect investors to be keeping an eye out for this data to try and gauge how prices pressures are or aren’t flowing down the production line, which will then have an impact on consumer price inflation and company profits. So far in June we saw an unexpected drop in the monthly PPI input data, from 1.2% to -0.1%, meaning that the prices of materials going into the production process were cheaper than the previous month. The monthly PPI output data came in at 0.4%, down from 0.8% the previous month, which showed that the drop in input prices hadn’t yet fully translated into cheaper products.
That is normal as it may take a few weeks or months to see the full impact of price changes, so it will be interesting to see what the input and output data shows for July to see if this divergence within the
