Image source: hamsterman © 123RF.com
The 12-month Consumer Price Index in the United Kingdom remained at 1.5 per cent in November, unchanged from October 2019.
The findings of the inflation report, which is compiled by the Office for National Statistics, were expected, though discouraging.
Inflation in the UK continues to be muted and way below the Bank of England’s 2 per cent target level, as the slump in global trade and uncertainties over Brexit negotiations continue to weigh down on internal business activity.
UK Inflation Rate. Image source: TradingEconomics.com
The observed muffled inflation for the second consecutive period – fourth below the BOE’s target-range – is exhibitive of the weakening price stability in the country, which is driven by shaken investors’ confidence.
Part of the economy has been experiencing a recovery over the past few weeks, which was mostly driven by the expectations for a majority victory of Boris Johnson’s party in the recent elections.
The core reason for that was the anticipation that the overall uncertainties over Brexit would be somewhat diminished on the conditions that the Conservatives won the majority of seats in the House of Commons.
The election victory for the Tories was more than decisive, which bolstered the pound and the British stock market. However, the gains were mostly driven by the short-term excitement of voters.
Investors and business owners, on the other hand, remain cautious and worried, as Johnson’s cabinet is expected to push Brexit forward at all costs, even if it means a no-deal divorce.
In such a scenario, the ambiguity surrounding Brexit would be finally over; however, the uncertainties over the long-term future stability of the British economy would just be starting.
UK Business Investment. Image source: TradingEconomics.com
That is the reason why the overall price stability in the UK, as demonstrated by the 12-month CPIH index, remains vulnerable in addition to the observed suboptimal levels of business investments within the economy.
As the initial excitement over Johnson's victory subsided, the main driving forces behind the pound's recent surge get diminished as well.
The GPUSD appears to have found a very strong resistance level, which the price is incapable of breaking through.
Instead, it has consolidated back below the significant resistance level at 1.31708 and the major support at 1.29800.
As the overall liquidity in the markets is expected to lessen over the Christmas holidays, the volatility driving the GBPUSD is also likely to fall, which means that the pair would most likely continue to trade within this narrow range until the end of the year.
GBPUSD 1D Price Chart. Image source: Trendsharks ©, created with TradingView.com
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