• YY Headline: 3.2% (Est: 3.1%; Prev: 3.4%)
• MM Headline: 0.6% (Est: 0.4%; Prev: 0.6%)
• YY Core: 4.2% (Est: 4.1%; Prev: 4.5%)
• MM Core: 0.6% (Est: 0.5%; Prev: 0.6%)

The March UK CPI numbers hit the wires earlier this morning, revealing a slower-than-expected pace of disinflation across all four key metrics. While all four reports released higher-than-expected numbers, the year-on-year reports continued to exhibit a disinflationary trajectory.

Month on month, both headline and core reports saw inflation rise by +0.6%, matching February’s data. However, this was higher than forecasts of +0.4% and +0.5%, respectively. According to the Office for National Statistics (ONS), the largest downward contribution to the CPI came from food prices, with the largest upward influence coming from motor fuels.

Of course, another widely watched print was the services inflation number, which came in at +6.0%, down from +6.1% in February. This is proving stickier than expected and slightly north of the Bank of England’s (BoE) forecast of +5.8%.

According to the overnight index swaps market, market pricing has pencilled in another hawkish repricing for the BoE Bank Rate following the latest UK inflation data, with only -37bps now priced in for the year compared to -48bps prior to the data release. November’s policy-setting meeting is now fully priced in for the first -25bps rate cut (-30bps), though September’s meeting is still firmly on the table (-21bps priced in as we write).

The latest inflation numbers follow yesterday’s labour data, which was mixed overall. The unemployment rate jumped to 4.2% in the three months to February, up from 3.9% in the three months to January 2024. However, wage growth was stronger than expected.

GBP/USD Largely Unchanged

The GBP/USD currency pair caught an immediate bid on the inflation data, briefly rallying to a high of $1.2479 before pulling back and reclaiming a portion of the upside in recent trading. Technically speaking, room for further underperformance is seen at least until the daily support zone between $1.2331-$1.2366.

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