BuffaloReport (Warsaw) – Weak inflation data contribute to the prolongation of the GBP/USD downtrend

UK inflation results show that the situation is more serious and requires some additional action. CPI y/y has fallen to 0,5% from 1,0% in November. The pair was testing 1,51 level after the news. However, right now the price is higher.

The main direction of the Cable is still downside. The next aim is at 1,5033. Following to the today’s stats, Mark Carney will write a letter to the Chancellor. It is required by the monetary policy remit.

UK inflation continues to show negative dynamics. Today’s data shows, that inflation is on the lowest levels since the beginning of the 21st Century. It strengthens expectations that Bank of England will have to hold rates at their current level for longer.

For the moment, British economists and financial authorities avoid to speak about risks of deflation. However, there is almost no doubts that BoE will remain cautious for the next half a year period.