Another inflation surprise in the UK. Economists at ING analyze Sterling outlook after CPI data.

Another inflation surprise

Core CPI unexpectedly rose from 6.8% to 7.1%, while the headline rate was unchanged at 8.7% despite consensus expecting a decline to 8.4%.

The FX impact of the CPI surprise was interesting. Sterling jumped but then rapidly erased gains: this probably signals how the room for a further hawkish repricing in the Sonia curve is limited and so are the positive implications for Sterling of more data surprises.