Re: nincs cím

UK CPI for May is due later today and any surprises are likely to be a significant driver for sterling. As seen in Chart 1, inflationary pressures have been building inside the UK economy since September 2009, and current levels remain well above the Bank of England's medium-term target of 2%. Newspaper articles have speculated for some time that the BoE could be forced into a pre-emptive rate hikes in a bid to head off inflationary pressures. This speculation intensified after April's unexpectedly high print of 3.7% y/y and some observers have gone so far as to attribute sterling's recent recovery, at least in part, to the possibility of such a hike. We see little prospect of this. For now, our UK economist continues to expect the BoE to wait until Q4 before delivering its first rate hike, but this forecast will likely be reviewed after the Budget on June 22, given that the BoE is unlikely to move so far ahead of the Fed and the ECB. The BoE's latest inflation report, and subsequent commentary by Governor King, made it clear that energy prices, sterling weakness, and the recent hike in Value Added Tax were the key contributors to recent CPI strength, and that the influence of these factors is likely to fade over the coming months. Indeed today's numbers are expected to provide the first evidence of this. Our UK economist forecasts a slight drop to +3.6% y/y in today's print, while the market is looking for a steeper decline to +3.5% y/y. Although such elevated levels would confirm the existence of ongoing price pressures, we think this gradual deceleration in CPI will continue over the coming months. Further downward pressure will likely be exerted by the introduction of UK austerity measures, as well as weakening demand from both inside the Eurozone and across the wider developed world as the sovereign debt crisis takes its toll on sentiment. Consequently, we remain cautious on sterling, and are alert to the risk that an unexpectedly large decline in CPI over the coming months could prompt the BoE to consider a resumption of QE. To cover this possibility, and in light of the upcoming SNB policy decision on Thursday, we remain long a 2-month GBPCHF put spread with strikes of 1.6300 and 1.5425 at a spot reference price of 1.6705. Our 3m EURGBP target remains at 0.85.