UK DATA: Upside surprise driven by volatile air fares and accommodation
- Headline just 7 hundredths above the BOE's forecast
- Air fares alone added 11 hundredths to headline CPI and accommodation 9 hundredths. That more than accounts for the upside surprise alone and is unlikely to be persistent (although accommodation may surprise to the upside again next month with Oasis in Edinburgh and the Fringe coinciding).
- Those categories alone accounted for a 4 tenth increase in services CPI, which only came in 10 hundredths above the BOE's forecast.
- Food and non-alcoholic beverages were 21 hundredths above the BOE's forecast.
- Energy only a marginal surprise for the BOE (larger surprise for consensus as we flagged the possibility of as it didn't appear consensus took into account the methodology change this year).
- So all in all, this print is nowhere near as concerning as it appears at first glance.
- GBPUSD is now only 5 pips above its pre-CPI levels.
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BTP TECHS: (U5) Bear Threat Still Present
- RES 4: 122.71 2.764proj of the May 14 - 20 - 21 price swing
- RES 3: 122.35 2.500 proj of the May 14 - 20 - 21 price swing
- RES 2: 122.00 Round number resistance
- RES 1: 120.50/121.73 20-day EMA / High Jun 13 and the bull trigger
- PRICE: 120.22 @ Close Jul 18
- SUP 1: 119.84 Low Jul 14
- SUP 2: 119.48 Low May 26
- SUP 3: 118.87 Low May 21
- SUP 4: 118.51 Low May 14 and key support
The primary trend condition in BTP futures is unchanged, it remains bullish. However, a corrective cycle has resulted in a breach of support at 120.09, the Jul 23 low. The break signals scope for a deeper retracement, potentially towards 118.87, the May 21 low. On the upside, key resistance and the bull trigger has been defined at 121.73, the Jun 13 high. Initial resistance to watch is 120.50, the 20-day EMA.
GILT TECHS: (U5) Maintains A Bearish Tone
- RES 4: 93.41 High Jul 2
- RES 3: 93.00 Round number resistance
- RES 2: 92.79 High Jul 4
- RES 1: 91.99/24 20-day EMA / HIgh Jul 15
- PRICE: 91.11 @ Close Jul 18
- SUP 1: 91.08 Low Jul 18
- SUP 2: 90.97 76.4% retracement of the May 22 - Jul 1 bull leg
- SUP 3: 90.59 Low May 29
- SUP 4: 90.46 Low May 23
A bear cycle in Gilt futures remains in play and last week’s bearish activity reinforces this theme. The contract has recently breached support at 91.63, the Jul 2 low. Price has also traded through 91.50, the 61.8% retracement of the May 22 - Jul 1 bull leg. The move down exposes 90.97, the 76.4% retracement point. Clearance of this level would strengthen a bearish theme. Initial firm resistance is at 91.99, the 20-day EMA.
UK DATA: MNI UK Inflation and Labour Market Insight: July 2025 Release
Click here for full PDF document.
- Relative to market expectations both the labour market report and CPI were a little stronger than expected.
- All in all, we think there is still enough evidence for the MPC to vote for a 25bp cut in August, and probably still enough for quarterly cuts to continue thereafter, but these data do reduce the risk of sequential cuts soon (particularly with CPI a little higher this week too) and probably swing us from quarterly cuts with a small risk of sequential cuts being the base case, to perhaps a November cut shouldn't be fully anticipated.
- We look at how sell side BOE views have evolved in light of the data releases and at market pricing over the past week.
- We also look in detail at both the labour market and CPI data.
