UK DATA: Details behind the CPI downside surprise; expect higher SONIA / gilts
Looking more into that UK CPI print: it was a "high" 3.2% print. But that still put headline CPI 16 hundredths below the BOE's forecast. It decelerated 0.31ppt since Oct.
- Services CPI was a tenth lower than both consensus and the BOE and fell 0.11ppt. In terms of contributions to headline CPI (broadly double these for services contributions): Accommodation contributed -0.05ppt, cultural services contributed -0.03ppt and rents contributed -0.02ppt. Transport services contributed 0.02ppt (of which air fares 0.01ppt) - this is a bit softer than expected. There were some small positive offsetting factors including restaurants and cafes which picked up a little more to 4.55%Y/Y (highest since September 2024).
- Food and non-alcoholic beverages contributed -0.07ppt to headline CPI. The biggest contributor here was bread and cereals (-0.04ppt to headline CPI) which fell to 2.04%Y/Y from 4.31%Y/Y. This will be a relief to the MPC given the focus on food inflation.
- Alcohol and tobacco also fell back and contributed -0.07ppt to headline CPI. -0.06ppt of this was from tobacco (duty-related).
- We estimate that core goods (NEIG) contributed -0.11ppt to headline CPI: -0.06ppt from clothing and footwear, -0.05ppt from recreation items, -0.04ppt from furniture and household equipment and -0.02ppt from vehicle purchases but offset by 0.07ppt from equipment for recording, data processing and photography. It does appear that quite a bit of this could be attributed to early Black Friday sales.
- As we noted above this does cement a cut this week. It also likely will see further cuts priced in for next year, and we would expect to see both the SONIA strip and gilts move higher on the open today.
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Historical bullets
GOLD TECHS: Outlook Remains Bullish
- RES 4: $4404.9 - 3.500 proj of the May 15 - Jun 16 - 30 price swing
- RES 3: $4400.0 - Round number resistance
- RES 2: $4381.5 - High Oct 20 and bull trigger
- RES 1: $4264.7 - 76.4% retracement of the Oct 20 - 28 correction
- PRICE: $4075.8 @ 07:27 GMT Nov 17
- SUP 1: $4032.3 - Low Nov 14
- SUP 2: $3927.5 - 50-day EMA
- SUP 3: $3886.6 - Low Oct 28 and a reversal trigger
- SUP 4: $3751.3 - 3800.00 Round number support
Gold is trading below last week’s high. The downleg between Oct 20 and 28, appears to have been a correction and has allowed an overbought condition to unwind. Recent gains suggest that correction is over. Key support lies at the 50-day EMA, at $3927.5. Clearance of this EMA would signal scope for a deeper retracement. For bulls, a resumption of gains would pave the way for a test of $4381.5, the Oct 20 high and bull trigger.
WTI TECHS: (Z5) Bearish While Resistance Remains Intact
- RES 4: $71.47 - High Jun 23 and a key medium-term resistance
- RES 3: $67.68 - High Jul 30
- RES 2: $65.77/68.43 - High Sep 26 and key resistance
- RES 1: $62.59 - High Oct 24
- PRICE: $59.45 @ 07:14 GMT Nov 15
- SUP 1: $55.96 - Low Oct 20 and bear trigger
- SUP 2: $54.85 - Low May 5
- SUP 3: $54.16 - Low Apr 9 and a key support
- SUP 4: $53.23 - 1.764 proj of the Jul 30 - Aug 13 - Sep 26 price swing
A sell-off in WTI futures on Nov 12 strengthens a bearish theme. A continuation lower would pave the way for a move towards key support and the bear trigger at $55.96, the Oct 20 low. Clearance of this level would confirm a resumption of the downtrend. Note that it is still possible a bullish corrective cycle remains in play. Resistance to watch is $62.59, the Oct 24 high. Clearance of this hurdle would signal scope for a stronger correction.
BRENT TECHS: (F6) Short-Term Resistance Intact For Now
- RES 4: $71.45 - 76.4% retracement of the Jun 23 - Oct 20 bear leg
- RES 3: $70.69 - High Jul 30
- RES 2: $69.29 - High Sep 26 and a key resistance
- RES 1: $65.95 - High Oct 24
- PRICE: $63.78 @ 07:08 GMT Nov 17
- SUP 1: $59.97 - Low Nov 20 and the bear trigger
- SUP 2: $58.72 - Low May 5
- SUP 3: $57.99 - Low Apr 9 and a key support
- SUP 4: $56.05 - 2.00 proj of the Jul 30 - Aug 13 - Sep 26 price swing
A sell-off in Brent futures last Wednesday highlights a bearish development. An extension lower would expose key support and the bear trigger at $59.97, the Oct 20 low. Clearance of this support would confirm a resumption of the bear cycle. Note it is still possible that a bullish corrective cycle remains in play - for now. A breach of resistance at $65.95, the Oct 24 high, would signal scope for a stronger recovery near-term.
