Essentials

• UK annual inflation in December from 3.9% to 4.0%。
• Alcohol and tobacco prices push up inflation。
• December data may give BoE a longer wait-and-see attitude on interest rates。UK Consumer Price Inflation Report

On Wednesday, UK inflation figures for December caught the eye of investors。Lower inflation data could get BoE talking about a rate cut。

However, the UK's annual inflation rate in December fell from 3..9% to 4.0%。Economists predict inflation of 3.8%。Core inflation remains at 5.1% unchanged。Economists expect core inflation of 4.9%。

According to the Office for National Statistics:

• In December, the consumer price index, which includes the cost of homeowner-occupied homes (CPIH), rose 4.2%。
• Alcohol and tobacco prices contribute most to inflation。
• Alcohol and tobacco prices rose 12.8% (Nov: + 10.2%)。
• In contrast, food and non-alcoholic beverages contributed most significantly to inflation.。
• Food and non-alcoholic beverage prices rose 8.0% (Nov: 9.2%)。
• In December, consumer prices rose 0.4%, while November fell by 0.2%。

Bank of England monetary policy implications

UK inflation data reduces expectations of Bank of England rate cut in first half 2024。Notably, the inflation report follows the release of UK wage growth figures on Tuesday.。Weaker wage growth could affect consumer spending and curb demand-driven inflation。However, the December inflation data may overshadow the wage growth data.。

GBP / USD Reaction to Consumer Price Inflation Report

GBP / USD up to 1 ahead of UK inflation report.A high of $26,438 before falling to 1.Low of $25964。

However, following the report, the GBP / USD exchange rate dropped from 1.$26051 up to 1.26438 USD。

On Wednesday, GBP / USD fell 0.07%, reported 1.26272 USD。

U.S. Retail Sales and Federal Reserve Speech

US retail sales to get investors' attention Wednesday。Economists predict December retail sales will grow 0.4%, compared with an increase of 0 in November.3%。Increased consumer spending could drive demand-driven inflation and delay Federal Reserve rate cuts to curb spending。

However, investors must pay attention to the Federal Reserve speech for forward guidance on interest rates.。FOMC members Michael Barr, Michelle Bowman and John Williams are scheduled to speak。