Ok, so the market is clearly fading any notion that the BoE is going to normalize policy aggressively.
This isn’t a data point that U.S. investors probably care a whole lot about, but U.K. inflation disappointed on Tuesday, printing at 2.6% in July – consensus was looking for 2.7%.
Obviously, this has something to do with the Brexit base effect rolling off.
The knee-jerk was predictable:
Here’s some context:
“There is now a very real chance that U.K. inflation will dodge reaching 3 percent in the latter months of this year, although it may well edge a little higher in the near term,” Howard Archer, an economic adviser at EY ITEM Club said, adding that he “doubts that there will be any interest rate hike until at least late on in 2018 – and it could well be delayed.”
And guess what? That’s great news for the FTSE and as you can see from the following chart, “bad news is good news” is the order of the day when it comes to stocks:
Stateside, you should take note of this. Because remember, just as the easing party was a global coordinated effort, so too will the unwind of stimulus be a group effort – every little bit of incoming data that helps undercut policymakers’ collective case for normalization helps in terms of postponing the day of reckoning for carry traders and vol. sellers.