UK 10-year gilt yield slumps to 1-1/2 month low after June consumer inflation fails to meet market expectations

The United Kingdom’s 10-year gilt yield slumped to 1-1/2 month low during European session Wednesday after the country’s consumer price inflation (CPI) for the month of June failed to meet market expectations. Investors will now be awaiting the retail sales for the same period scheduled to be released on July 19 by 08:30GMT for further direction in the debt market.

The yield on the benchmark 10-year gilts, slumped nearly 2-1/2 basis points to 1.23 percent, the super-long 30-year bond yields fell nearly 1-1/2 basis points to 1.70 percent and the yield on the short-term 2-year traded 1 basis point lower at 0.74 percent by 09:25GMT.

Despite motor fuel prices rising to their highest since September 2014, annual consumer price inflation held steady in June at 2.4 percent. The figure was at the bottom end of forecasts in a Reuters poll of economists who had expected to see the first increase this year, to 2.6 percent, according to data released by the Office for National Statistics (ONC).

Core consumer price inflation, which strips out energy and food prices among other things, fell to 1.9 percent from 2.1 percent in May — below all forecasts in the Reuters poll and the weakest reading since March 2017. The ONS reported the biggest month-on-month drop for a May to June period in clothing prices since 2012 as retailers slashed prices for the summer sales.

Meanwhile, the FTSE 100 traded 0.65 percent higher at 7,675.66 by 09:45GMT, while at 09:00GMT, the FxWirePro's Hourly Pound Strength Index remained neutral at -32.04 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex