Inflation declines in the UK and Canada in June

In June, both Canada and the UK experienced a notable decline in inflation rates. This trend aligns with the broader global movement toward lower inflation. The British Pound (GBP) rose sharply against the US Dollar (USD), while Canadian benchmark stock indices showed significant gains.

Inflation Falls in The UK

In the UK, a positive inflation report pushed the British Pound higher. The CPI remained at 2% year-on-year, unchanged from June, which aligns with the Bank of Englands (BoE) inflation target. Core CPI also remained steady at 3.5% year-on-year. Every month for June, CPI dropped from 0.3% to 0.1%, while core CPI eased from 0.5% to 0.2%.

However, UK services inflation remained unchanged in June at 5.7% year-on-year, nearly three times the BoE‘s inflation target. This persistent high services inflation could complicate the BoE’s plans to lower interest rates.

Inflation Falls in Canada

Canadas Consumer Price Index (CPI) rose by 2.7% year-on-year in June, down from 2.9% in May, matching a three-year low from April. Monthly, CPI posted a 0.1% decline, a sharp drop from the 0.6% increase in May. This was the first monthly decline of the year, primarily driven by a significant reduction in gasoline prices.

However, Core CPI, which excludes food and energy prices, rose by 1.9% year-on-year, slightly up from 1.8% in May. Despite this increase, it remained below the Bank of Canadas (BoC) inflation target of 2%.

Conclusion

These inflation reports indicate a continuing disinflationary trend, which supports the case for interest rate cuts. The Bank of Canada has already lowered rates in June, and it is likely only a matter of time before the Bank of England follows suit.

The USD/CAD currency pair showed little movement in response to the inflation release, while the GBP/USD pair experienced strong gains of 0.52% and 0.67% respectively following the inflation reports.

On the stock market, Canadian benchmark stock indices climbed sharply while UK indices showed a slight decline. The S&P/TSX (Canada) surged 1.07% on Tuesday, rising 243 points to close at 22,995. In contrast, the FTSE 100 (UK) fell by 28 points (0.36%) to 8,136 on Wednesday.

These developments reflect the mixed reactions in financial markets to the evolving inflation landscape in both countries.