Wednesday's UK inflation figures were slightly higher than expected, Commerzbank FX analysts Ulrich Leuchtmann and Michael Pfister note.

BoE to make its first rate cut soon enough

“Wednesday's UK inflation figures were slightly higher than expected. The headline rate came in at 2.0% y/y (1.9% expected), while the core rate was 3.5% (3.4% expected). However, the figures were very close, with the headline rate coming in at 1.97% and the economists' average at 1.94%.”

“A real surprise looks different. I suspect that the news was not so much that rates were slightly higher than expected. Rather, it was that this went against the global trend. While inflation figures in the US, Canada, Sweden, etc. have recently surprised to the downside, inflation in the UK has been (somewhat) more stubborn.”

“The next decision by the Bank of England (BoE) should be very exciting. We still tend to think that the BoE will then make its first rate cut soon. But whether it is in August or September, the key point will be that with core and services inflation continuing to be high, large rate cuts are unlikely to be an issue. The Pound Sterling should therefore remain well supported over the medium term.”