UK Annual Inflation Lowers 2012.03.20

March 20, 2012 17:11

The Office for National Statistics (ONS) Tuesday reported the United Kingdom’s consumer price index (CPI) increased a monthly 0.7 points to 121.8 in February from January at 121.1. Yet, the annual inflation rate lowered to 3.4% in February from January’s 3.6% figure.Despite this, the annual inflation rate resulted higher than analysts’ projections of 3.3% although it had consistently lowered since November of 2010. The largest factors for the annual CPI rate decrease included lowered prices in domestic electricity and gas as well as recreation & culture and transport, while the biggest pressures onconsumer prices moving upward included alcohol off sales and vegetables. 

 

In other news, the Reserve Bank of Australia (RBA) published minutes from their March 6th monetary policy meeting. The RBA accounted various factors in the economic conditions ofthe country. They noted that success in the trading industry was largely realized in the mining related sectors of the region as well as increases to investment and investment intentions.Yet, investment intention in non-mining sectors continued markedly low. Furthermore, consumer perceptions about their financial situation remained below average. As well, consumers’ concerns for unemployment and potential global economic problems remained significant. Retail sales softened since the middle of 2011 and housing credit remained less than nominal income. The bank noted conditions of the global economy’s impact on the country and ultimately left the cash rate unchanged at 4.25%.

With U.K. annual inflation lowering, we expect the Bank of England to keep rates on hold longer than expected. The Reserve Bank of Australia has a twin sided economy in its hands and might be forced to raise rates if the booming mining areas experience higher inflation. The GBPAUD has rallied higher despite the fundamentals in the respective economies. We expect a reversal in the rally and see the GBPAUD trading as low as 1.5000. 

 

Eugene Ross, Analyst

Admiral Markets

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