• FxWirePro: Pound declines to lowest in 10 months as inflation numbers disappoint

    Source: FxWire Pro - Commentary / 18 Jul 2018 05:10:11   America/New_York

    The British pound sterling which continues to face the selling pressure amid a slowing economy and Brexit uncertainties declined to the lowest level in 10 months against the U.S. dollar as the inflation reading disappoints to the downside.

    Sterling declined to as low as 1.301 against the USD after the inflation report, which is the lowest level for the pound since September last year. It is currently trading at 1.302 against the USD.

    Inflation report:

    • The retail price index is up 3.4 percent y/y in June, 0.1 percent higher than last month. However, monthly growth was 0.3 percent, exact 0.1 percent lower than last month’s growth.
    • House price index up 3 percent y/y in June, down from 3.9 percent in May.
    • Producer price inflation for output was up 3.1 percent y/y, 0.1 percent higher compared to last month.
    • Producer price inflation for input saw the biggest rise; up 10.2 percent y/y in June, which is 0.6 percent5 higher compared to last month.
    • However, it was the core CPI report that has taken away the steam out of Sterling bulls. Core CPI was up 1.9 percent y/y in June, down 0.2 percent compared to last month.
    • Headline inflation was unchanged at 2.4 percent, which was below 2.6 percent projected by economists surveyed by Bloomberg.

    Trade idea:

    The recommended sell call is almost 750 pips in the money, https://www.econotimes.com/FxWirePro-Sell-pound-targeting-1376-against-dollar-1122287

    At this point, we do not see an opportunity for an entry as the stop loss would be quite large. However, with Sterling forecasted to decline to 1.25 and beyond, readers can choose to enter at discretion.

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