• UK CPI eases to 9.9% YoY in August vs. 10.2% expected.
• Monthly UK CPI arrives at 0.5% in August vs. 0.6% expected.
• GBP/USD falls towards 1.1500 on disappointing UK CPIs.

The UK Consumer Prices Index (CPI) 12-month rate came in at 9.9% in August when compared to 10.1% seen in July while missing estimates of a 10.2% print, the UK Office for National Statistics (ONS) reported on Wednesday. The index retreated from the highest level since 1982.

Meanwhile, the core inflation gauge (excluding volatile food and energy items) rose to 6.3% YoY last month versus 6.2% booked in July, meeting the market consensus of 6.3%.

The monthly figures showed that the UK consumer prices climbed by 0.5% in August vs. 0.6% expectations and 0.6% previous.

The UK Retail Price Index for August arrived at 0.6% MoM and 12.3% YoY, below estimates across the time horizon.

FX implications

In an initial reaction to the UK CPI numbers, the GBP/USD pair slipped 20 pips to surrender 1.1500 once again.

The pair was last seen trading at 1.1491, almost unchanged on the day. The US dollar regians upside traction in the early European morning.

Why UK inflation matters to traders?

The Bank of England (BOE) is tasked with keeping inflation, as measured by the headline Consumer Price Index (CPI) at around 2%, giving the monthly release its importance. An increase in inflation implies a quicker and sooner increase of interest rates or the reduction of bond-buying by the BOE, which means squeezing the supply of pounds. Conversely, a drop in the pace of price rises indicates looser monetary policy. A higher-than-expected result tends to be GBP bullish.