The figures were a slight beat with headline annual CPI coming in at +10.1% (vs +10.0% estimate) while annual core CPI came in at +6.5% (vs +6.4% estimate), alongside the monthly figures of +0.5% (vs +0.4% estimate) and +0.6% (vs +0.5% estimate) respectively.
While higher inflation figures previously tend to be associated with a positive currency reaction, mainly due to more aggressive central bank pricing, it is quite a different case for the pound after the happenings in the past few weeks.
The BOE is already expected to keep with the tightening path and after the mini-budget announcement, traders ramped up pricing for a more aggressive approach. However, all of that has since pulled back and we are now returning to the outlook where the economy is set to be crushed by surging energy prices and the cost-of-living crisis. As such, higher inflation at a time when the BOE is unable to do as much - not that it would help in any case - is a painful pill to swallow for sterling.
The latest dip today brings into focus the 100-hour moving average (red line) at 1.1282 currently. Fall below that and the near-term bias turns more neutral with scope to traverse towards 1.1200 next. Daily resistance is still set out somewhere around the trendline (white line) at 1.1340 so that will remain a notable level to watch going into the close later today as well.
