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Services inflation drive the surprise to core CPI

UK DATA
  • First glance that's a one tenth upside surprise to core.
  • Services CPI rose from 7.2%Y/Y to 7.4%Y/Y - which are probably the main driver of the surprise here.
  • GBPUSD spiked from 1.2705 to 1.2731 but is now settling down around 5 pips higher than pre-data levels.
  • Although we saw an upside surprise driven by services inflation given what is already priced into UK markets following the labour market report yesterday, it's probably not enough to push us above around a 20-25% probability of a 50bp hike here.
  • Ahead of the September MPC decision we will have one more labour market print (the week before) and one more inflation print (released the day before the decision but the MPC will have pre-release access).

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