U.K. inflation likely to have accelerated further in January, slight possibility of regaining target

The U.K. inflation is likely to be on the rise with a slight likelihood of regaining target. According to a Societe Generale research report, there is possibility of a major upward influence on the January inflation data from petrol prices that increased 2.8 percent sequentially in reaction to the 17 percent rise in the sterling price of oil in December.

Nearly, most of the move was because of the dollar price of oil. Sterling was quite stable in the month. However, on the contrary, prices of food are expected to have made just a modest move in January. Food inflation is likely to have slowed to -0.9 percent year-on-year from 1.1 percent, noted Societe Generale. The main effects of the subdued pound are yet to be felt.

Moreover, certain pass-through to core inflation is expected. Core inflation is anticipated to have accelerated to 1.8 percent from 1.6 percent. The overall result would be a rise in headline CPI inflation from 1.6 percent to 1.9 percent year-on-year in January.

“There is even a risk that it moves right back to the target rate of 2.0%, for the first time since December 2013”, added Societe Generale.

At 9:00 GMT the FxWirePro's Hourly Strength Index of British Pound was bullish at 81.2017, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 22.5162. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex