Understanding What the UK Inflation Rise Means for Your Spread Betting – City Index

LONDON--(BUSINESS WIRE)-- Spread betting expert Joshua Raymond of City Index (http://www.cityindex.co.uk/) recently stated “UK inflation hit a new two-and-a-half year high of 4.5% in April, [...] whilst core prices rose at a record pace and hit their highest levels since records began in January 1997.” The lion’s share of these price increases was spread across alcohol and transport. This is an example of how market analysis can effectively inform your spread betting strategy.

For example, the Bank of England indicated the increased figures were at least partly expected in its last quarterly inflation report. As Market Strategist Mr. Raymond points out: “[The report] indicated the UK central bank’s belief that inflation would hit 5% before the end of the year. Given the current trajectory of UK inflation, which has risen from 1.1% in 2009 to now 4.5% last month, it’s now feasible that it could well get to the 5% mark much sooner than the end of the year.”

In spite of this, a large drop in inflation is expected early next year when the VAT hike has been fully digested. The MPC (Monetary Police Committee) believes inflation will ease to its 2% target in 2013.

However, technical analysis of April’s figures reveals the 4.5% rise was largely driven by alcohol, tobacco and transport. Joshua Raymond notes a continuation of this could result in the MPC considering a rate hike to curb excessive escalation before the current market consensus of a hike to come at end of the year.

“Having said that”, continues Mr. Raymond, “the language used in Mervyn King’s now customary letter to the Chancellor of the Exchequer, George Osbourne, appeared to quash that potential”.

Ultimately, while the new, increased inflation figure may have changed very little, analysing the information and recognising precisely why it has changed very little could prove vital to your future spread betting.

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City IndexJoshua Raymond+44(0)20-7107-7002
joshua.raymond[at]cityindex.co.uk

Source: City Index