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17 June 2020

European session review: GBP slips, weighed down by weak UK's inflation data and fears of no-deal Brexit

TimeCountryEventPeriodPrevious valueForecastActual
06:00United KingdomProducer Price Index - Output (YoY) May-0.7%-0.9%-1.4%
06:00United KingdomProducer Price Index - Input (YoY) May-10.2%-6%-10%
06:00United KingdomProducer Price Index - Input (MoM)May-5.5%4.5%0.3%
06:00United KingdomProducer Price Index - Output (MoM)May-0.8%0%-0.3%
06:00United KingdomRetail Price Index, m/mMay0%0.1%-0.1%
06:00United KingdomHICP ex EFAT, Y/YMay1.4% 1.2%
06:00United KingdomRetail prices, Y/YMay1.5%1.2%1%
06:00United KingdomHICP, m/mMay-0.2%0%0%
06:00United KingdomHICP, Y/YMay0.8%0.5%0.5%
09:00EurozoneConstruction Output, y/yApril-17.5% -28.4%
09:00EurozoneHarmonized CPIMay0.3%-0.1%-0.1%
09:00EurozoneHarmonized CPI ex EFAT, Y/YMay0.9%0.9%0.9%
09:00EurozoneHarmonized CPI, Y/YMay0.3%0.1%0.1%


GBP fell slightly against most of its major rivals in the European session on Wednesday, pressured by weak UK consumer and producer price data for May and re-emerged fears of a no-deal Brexit.

The Office for National Statistics (ONS) reported that the UK's consumer price inflation decelerated to 0.5 percent y/y in May from 0.8 percent y/y in the previous month, matching economists' expectations. That was the lowest rate since June 2016. According to the report, the largest downward contributors for the annual inflation were transport, recreation and cultural goods, and clothing and footwear. Another report from the ONS revealed that output prices fell 1.4 percent y/y in May after a 0.7 percent y/y decrease in April, while input prices declined 10.0 percent y/y after a 10.2 percent y/y drop in the previous month.

Poor inflation data added to the anticipation that the Bank of England's (BoE) policymakers would increase the stimulus program at their policy meeting on Thursday.

No-deal Brexit fears also weighed on the pound. On Monday, the EU and UK leaders agreed that the negotiations on their post-Brexit trade relations should be intensified. In addition, British Prime Minister Boris Johnson stated that he saw no reason both sides couldn't reach an agreement by July. Today, however, Reuters reported, citing an internal document from Germany's government, dated June 15, that Berlin saw the negotiations to take longer. “From September, the negotiations enter a hot phase,” the document read. “Britain is already escalating threats in Brussels, wants to settle as much as possible in the shortest possible time and hopes to achieve last-minute success in the negotiations.”

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