Pound shot in reaction to increased inflation

GBP / USD rose 0.9% to 1.3270, the high since August 3, as data shows that inflation in the UK in August accelerated more than forecasted to 2.9%. Prior to the data, the pound rose to 1.3210, rebounding from the session’s minimum in Asia at 1.3161, as DXY was unable to keep profit. The resistance is at 1.3267, the high of August 3. Support is located at 1.3118, 23.6% correction of Fibonacci movement since August 24. EUR / GBP: -0.7% to 0.9017, the lowest level since August 10. Inflation in the UK accelerated more than forecast, in August due to the strongest in almost three decades of rising prices for clothing. Inflation jumped to 2.9 percent from 2.6 percent in July, following the resumption of the pound’s fall, which increased import costs over the past year. Kernel inflation also accelerated more than economists had expected, reaching the highest level since 2011, the Office of National Statistics reported.
These figures may put new pressure on the Bank of England, which is struggling with a price increase above its target of 2 percent. The Monetary Policy Committee, consisting of nine members, split in recent months: two members voted to raise interest rates from a record 0.25 percent. The jump in inflation in August was due to a rise in price of clothing and footwear, which increased in price by 2.4 percent for the month and 4.6 percent compared to the level of a year ago. The statistics office noted that a weak sterling may be partially guilty of this, as the currency fell 11 percent after voting for secession from the European Union in June 2016. BOE Managing Director Mark Carney will have to write a letter to Chancellor Philip Hammond if the CPI indicator deviates by more than one percentage point from the central bank’s goal, explaining its strategy to return it to the control of the Central Bank. The meeting of the Bank of England will take place this Thursday and should lead to an even greater pound reaction, as traders now have high expectations of an increase in the rate.

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