Ella 
Another upside surprise in UK CPI data points to possible 50bps rate hike from BoE
CPI monthly increase was 0.7%, greater than the expected 0.4%. Thus, the annual rate was unchanged at 8.7%, rather than falling to 8.4% as expected. To make matters worse, it was the underlying inflationary pressure that caused the upward surprise, with core CPI accelerating from 6.8% to 7.1% on an annualized basis, a new cyclical high.
Our call for the BoE tomorrow is 25bps, but given this dire inflation data, we are slightly leaning towards 50bps for now.
More aggressive action, as before, should help lift the pound in the short term, but investor concerns about the impact on growth are likely to grow, which will limit gains at higher levels, with GBP/USD likely to approach 1.3000 level. But we are already on the fine line where high inflation/BoE policy action boosts the pound and high inflation/BoE policy mismanagement damages the pound.
