Inflation eases slightly to 5.07% in January

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Meanwhile, the general index for the month of December 2017 stood at 130.3, which is 7.1 percent higher as compared to the level in the month of December 2016.

Traders work on the floor of the New York Stock Exchange, (NYSE) in New York, U.S., February 5, 2018.

Core CPI, which strips out more volatile prices such as food and fuel, rose 2.7% in January, more strongly than the 2.6% predicted and up to its joint highest level since 2011 from the 2.5% rise a month before.

Brettell also noted that it now appears that the next interest rate increase "may well happen in May". Transport and communication gained in inflation of 1.97%.

British inflation unexpectedly held close to its highest level in almost six years in January, highlighting the challenge facing the Bank of England and reinforcing expectations of a rise in interest rates in May.

U.S stock futures fell more than 1 percent after the CPI data was released at 8:30 a.m. ET.

"Today's CPI confirms that inflation is trending higher", says Charlie Ripley, senior investment strategist at Allianz Investment Management in Minneapolis.

If Tuesday's ONS figures match forecasts, it would mark the second drop for consumer inflation since June.

Stronger inflation readings will likely cause interest rates to move higher. The 2-year yield, most reflective of Fed policy, rose ahead of the report, to 2.10 percent.

Electricity production showed a modest improvement, rising 4.4 percent in December, as compared 3.9 percent in November and 6.4 percent a year ago.

The BoE surprised investors last week by saying interest rates would need to rise sooner and by somewhat more than it had previously expected, as it wanted to get inflation back to target within two years rather than three.

The main event in the United Kingdom this week will be tomorrow's release of January's inflation data. The fact that it didn't, suggests that market participants are at least cautious of the ability of the United Kingdom economy to sustain sooner and faster rate rises in the face of Brexit uncertainties.

"There is so much noise by the policymakers in the market that, ok, perhaps the United Kingdom is ready for another interest rate hike -by no means is the United Kingdom economy ready for another interest rate hike", Aleem said. The selling in the bond market spilled over into other markets in the past two weeks, pressuring shares around the world, as some investors anxious a jump in yields could make relatively risky stocks look less attractive.

For now, "the rising inflation expectations shouldn't be considered something to panic about", Ripley adds.

Other important data that will be released will be the retail sales from the United States, employment data from Australia, the manufacturing data from the U.S., and Canadian employment data. The PPI measures wholesale price pressures in the economy.

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