After yesterday’s US CPI (consumer price index) inflation report which shook the markets, today is another inflation day, although it is not expected to have that much impact. The UK CPI inflation report for August was released earlier this morning, while the US PPI (producer price index) inflation figures will be released in the afternoon.

Yesterday we saw the USD make some massive gains after the increase in inflation in August against expectations, as odds of another strong rate hike from the FED jumped. Although the GBP is not that sensitive to the inflation figures despite them being at record levels without seeming to decline soon.

Today’s UK CPI inflation report which was released a while ago showed a slight cool-off to 9.9% from 10.1% previously. The GBP is a bit higher but it’s mainly on the back of the USD, which is retreating this morning after the surge yesterday on the US CPI inflation figures.

UK August CPI Inflation Report

• UK August CPI YoY +9.9% vs +10.2% expected
• July CPI was YoY +10.1%
• Core CPI YoY +6.3% vs +6.3% expected
• Prior core CPI YoY +6.2%

The headline reading sees UK inflation fall back from double-digits in July, with August inflation up 0.5% on the month (vs estimates of 0.8%). A fall in the price of motor fuels made the largest downward contribution to the change in inflation last month while the largest upward contributions came from housing and household services (principally from electricity, gas, and other fuels), transport, and food and non-alcoholic beverages.

But the core reading is seen ticking slightly higher and that won’t provide much comfort in terms of inflation developments overall. It will still keep the BOE on the tightening path while maintaining fresh worries on the economy as soaring price pressures grip households.

GBP/USD Live Chart