Important events today:

18:00 UTC – US: publication of Fed meeting minutes.

The U.K. presented fresh statistics on inflation. The overall figure fell by 1.4 p.p. to 8.7%, while the core indicator, which does not include food and energy prices, rose by 0.6 p.p. to 6.8%. The Bank of England focuses primarily on the second indicator when setting its monetary policy. Overall, both indicators came out much worse than the median forecasts, however it is a positive signal for the British currency. Why?

Initially the market was expecting the inflation rate in Britain to be gradually falling which would allow the Bank of England to bring the interest rate up to 4.75% and complete the cycle of monetary tightening, however it is now clear that the regulator will have to raise the rate more than the U.S. Federal Reserve which has a rate of 5.25%. Ideally, the rate in Britain should be higher than the core inflation rate by 1% to allow the regulator to reverse the uptrend of the consumer price index, but the Bank of England does not want to take such a step as we would immediately see a strong crisis in the UK economy.

Recommendations: Buy 1.2420/1.2380 and TP 1.2500.