British pound falls on UK inflation data

KEY INFLATION INDICATORS IN THE UK:

• Core inflation rate y/y (May) actual 7.1% against forecast 6.8%.
• Inflation rate y/y (May) actual 8.7% against the forecast 8.4%.
• Inflation rate m/m (May) Actual 0.7% vs. previous 0.5%.

At the same time, food price inflation remains another area of ​​concern, with a slight drop overall for the month, but the year-on-year rate far exceeds headline inflation. Fuel prices were the biggest contributor to lower monthly inflation in May, falling 13.1% year-on-year from 8.9% in April. Inflation for UK goods eased slightly to 9.7% in May, but another concern is inflation in services, which accelerated to 7.4%. This could pose an additional risk to inflation control as the UK moves into a busy summer period that could support rising service inflation.

Inflation in the UK continues to be a hotly debated topic, with rising mortgage payments being one of the key issues. The mortgage issue was discussed yesterday in the House of Commons with British Chancellor Jeremy Hunt, who was quick to stress that any further government intervention could lead to further inflationary pressures. The chancellor urged consumers to pay attention to the state support measures that are already in place.

The ongoing revision of the BoE's peak rate remains another area of ​​contention, with current market valuations at around 5.75%. This suggests a further 130 basis points upside, which the BoE sees as extremely optimistic. 

GBPUSD posted an initial 50 pips jump towards the 1.2800 zone before cutting back to 1.2770 at the time of writing. The bulls are still in control after a new yearly high recorded at the end of last week. Immediate support lies at 1.2680 before the 1.2600 and 1.2500 areas come into focus, the latter of which is in line with the 50-day MA.

Considering continuation of the up rally and the psychological 1.3000 remains key, with a break above likely to lead to the 1.3250 area.

Key levels to keep an eye on:

Support levels:

1.2680
1.2600
1.2510 

Resistance Levels:

1.2850
1.3000
1.3250