The UK’s food prices rose at the fastest pace since 1980 last month, driving inflation to a 40-year high and heaping pressure on the already government to balance the books without gutting help for the nation’s poorest residents. Food prices jumped 14.6% in the year through September, led by the soaring cost of staples such as meat, bread, milk, and eggs, the Office for National Statistics said Wednesday. That pushed consumer price inflation back to 10.1%, which is the highest since 1982.
The figures immediately fueled demands from every corner of the country that the government should do more to help families and retirees as it struggles to regain credibility after an ill-fated package of tax cuts roiled financial markets. Treasury chief Jeremy Hunt ditched the package after he assumed his responsibilities last week, but he has warned that this will be a difficult winter and spending reductions also will be needed. According to a journalist, parents are having to make difficult decisions such as do they pay the bus fare to send their child to education or do they use that money to feed their child
Its effect on GBP/USD
GBP/USD retreats from a month and a half descending resistance line near 1.1350 ahead of the key UK inflation numbers, near 1.1330 as things stand now. In doing so, the Cable pair portrays the market’s indecision due to a lack of major data/events, as well as anxiety before the crucial and decisive CPI number. Although it has already been confirmed by BOE that its QT is starting from November 01, today’s inflation numbers will be important as UK PM Liz Truss’ leadership keeps pushing the “Old Lady”, which is a name by which the British central bank is informally known, towards faster rate hikes. It should be noted that the political uncertainty surrounding the UK and the market’s indecision that is strictly due to a light calendar elsewhere also challenge the UK CPI’s importance for the GBP/USD traders.
Even if the inflation numbers manage somehow to stay firmer on the MoM, in addition to posting the multi-year high YoY numbers, GBP/USD is predicted to cross the immediate trend line resistance and rush towards the monthly high near 1.1500. Alternatively, pullback moves that will be in place by the authorities to bring things to normal may have another chance of reversing. This is strictly due to the market’s optimism and the UK’s political drama.
Technically, the 50-DMA level which was near 1.1470 serves as an addition to the upside filters, in addition to the aforementioned resistance line which is near 1.1250. Meanwhile, a convergence of the 21-DMA and a month-long ascending trend line highlights 1.1140 as the short-term key resistance.
UK CPIS
The Consumer Price Index which the Office released for National Statistics is a measure of price movements by comparing the retail prices of a representative shopping basket of goods or services. The purchasing power of the GBP is predicted to be dragged down amid inflation. The CPI is considered to be the leading indicator when it comes to measuring inflation and changes in purchasing trends. A high reading on the scale is considered to be positive while vice versa will be deemed to be negative.
