Home Daily Commentaries Focus remains on Thursday’s BoE decision

Focus remains on Thursday’s BoE decision

Daily Currency Update

This morning GBP/USD remained elevated ahead of the release of UK inflation figures.

The UK Consumer Price Index for May rose past 8.4% market expectations to reprint the 8.7% y/y figure. However, the Core CPI reading, which excludes volatile food and energy items, saw an unexpected rise to 7.1% from the previous month’s 6.8%. GBP/USD moved higher by 60 pips to 1.2800 before retreating to 1.2760 as investors reassess the UK inflation data of Wednesday’s London opening session.

The spike in the pound is likely due to markets forecasting potential further hikes from the BoE. Higher inflation has been creating room for the BoE to increase rates to bring inflation down, which in turn benefits a currency however there are views that this could be switching to higher inflation causing the BoE to force the economy into a recession which may end up hurting the pound. David Bailey's press meeting will be closely watched and comments on whether the UK economy can weather the storm.

Key Movers

Thursday remains all important for the pound now, the upbeat UK inflation numbers with the previously published strong British jobs report, the Bank of England appeared to be set to announce another increase in its benchmark interest rate on Thursday.

Today’s calendar of events sees speeches of multiple central bankers from the US, Europe, and the UK and while investors watch for a clearer market direction in US Fed Chair Jerome Powell’s bi-annual testimony. Fed policymakers back higher rates and the sentiment could help keep the US Dollar strong. Fed Board nominee Adriana Kugler has mentioned with the prepared statements for Wednesday’s Testimony, that returning inflation to the central bank's 2% target is key to setting a strong foundation for the US economy.

Expected Ranges

  • GBP/USD: 1.275 - 1.2800 ▲
  • GBP/EUR: 1.1685 - 1.1730 ▲
  • GBP/AUD: 1.8758 - 1.8891 ▲
  • EUR/USD: 1.0900 - 1.0933 ▲