Inflation is slowing in the United Kingdom, Canada and New Zealand

• Canada, the United Kingdom and New Zealand recorded declines in inflation in June.
• The British pound and New Zealand dollar rose strongly against the US dollar.
• Benchmark stock indices in Canada and New Zealand posted strong gains.

We continue to observe a global downward trend in inflation. This week, June inflation reports from Canada, the United Kingdom and New Zealand showed declines compared to May. Canada released its inflation report on Tuesday and the UK and New Zealand on Wednesday.

Canada’s Consumer Price Index (CPI) rose 2.7% year-over-year in June, down 2.9% from May and matching the three-year low recorded in April. On a monthly basis, the CPI registered a 0.1% decline, down from 0.6% in May. The year-to-date decline was due to a sharp drop in petrol prices.

Core CPI, excluding food and energy, moved in the opposite direction, rising 1.9% year-on-year, one point higher than 1.8% in May. Even so, the rate of inflation set by the Bank of Canada was below 2%.

In the UK, a positive inflation report boosted the British pound today. CPI was 2% year-on-year, unchanged from June, the Bank of England’s inflation target. Core CPI was 3.5% year-on-year. On a monthly basis, the June CPI edged down from 0.3% to 0.1%, while the core CPI eased from 0.5% to 0.2%.

Services inflation in the United Kingdom was unchanged at 5.7% year-on-year in June, nearly three times the inflation target. Services inflation is closely monitored by the Bank of England and could complicate plans to cut interest rates.

New Zealand’s inflation rate eased to 3.3% year-on-year in the second quarter from 4% in the first quarter. On a quarterly basis, inflation eased to 0.4% from 0.6% in the first quarter.

These three inflation reports show that inflation continues to move along the path of inflation, supporting the case for lowering interest rates. The Bank of Canada cut interest rates in June, with the Bank of England and Reserve Bank of New Zealand following suit.

USD/CAD (see: USD/CAD price today), barely moved in response to the inflation release, while GBP/USD (see real-time GBP/USD quote) and NZD/USD (see: NZD/USD amount today), after the inflation data was released. registered strong increases of 0.52% and 0.67% respectively.

In the stock market, Canadian and New Zealand benchmark stock indices rose sharply, while the British posted a slight decline.

The S&P/TSX (Canada) rose 1.07% on Tuesday, up 243 points to close at 22,995.

The FTSE 100 (UK) was down 28 points (0.36%) at 8,136 on Wednesday.

The NZX 50 (New Zealand) closed Wednesday at 12,292, up 107 points (0.88%).

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