- Weaker than expected UK CPI (MAY) knocks back British Pound.
- Technicals see it as a contrarian sell; look to buy the dip.
- See the UK Consumer Price Index data on the DailyFX Economic Calendar.
In what may prove to be an iteration of the timeless duel of the 'which is mightier - the pen or the sword?', the release of the May UK inflation report has done little to shake the market's faith in the Bank of England's fresh hawkish posture.
While the monthly, yearly, and core yearly inflation figures missed economists' expectations in the May CPI reading (sword - hard data), the looming commentary from BoE Governor Mark Carney's Mansion House speech (pen - mere words) last Thursday has, and may prove to be, the overwhelming driver of the British Pound, eclipsing whatever influence today's inflation data may temporarily hold.
Governor Carney couldn't have been more straight forward when he said that a rate increase "could happen sooner than markets currently expect." Whereas a Q2'15 rate hike was being priced in, swaps markets have repositioned themselves for an early-Q1'15 rate hike.
A few more pieces of hot economic data, and it wouldn't be surprising to see those rate hike expectations spill over into Q4'14 - which would be a boon for the Sterling.
Accordingly, view the video above for a look at setups in GBPUSD, GBPCHF, EURGBP, and GBPJPY, as evidence mounts that we should be 'buying dips'" rather than 'selling rallies' in the GBP-crosses.
Read more: Bear Flags in EUR/JPY, EUR/USD Collide with FOMC This Week