Morning Forex Fundamental: GBP

Morning Forex Fundamental: GBP

'Consumer-price inflation may yet touch 3 percent in the near term, but it should start heading gradually down toward the end of the year' - Howard Archer, an economist at IHS Global Insight

Consumer price pressure in Britain eased to a 14-month low last month, led by airfares and summer discounts on clothes, figures from the Office for National Statistics showed Tuesday. A gauge of consumer prices fell to 2.8% in July, down from 2.9% a month earlier, meeting analysts' expectations. On a monthly basis prices were unchanged, compared with a 0.2% drop recorded in June, while core CPI, which excludes volatile prices of energy, food, alcohol and tobacco, decelerated to 2%, lower than market expectations of 2.2% and previous month's figure of 2.3%.

The ONS also said the main contributors to the fall in the rate were airfares, particularly long-haul flights, along with price falls in the sectors of recreation, culture, clothing and footwear. Moreover, an increase in petrol and diesel prices partially offset a drop. Furthermore, prices in London, which sometimes act as a leading indicator for the rest of the economy, soared 8.1%.

The Bank of England is currently aiming at 2% inflation target, also saying the consumer-price growth will remain around current level for a couple of month before easing. And even though Mark Carney has introduced forward guidance last week, the BoE said price stability and the inflation goal are still its priority.