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UK inflation dips unexpectedly

GBP - British Pound

UK inflation dipped unexpectedly in February, with CPI data registering a year-on-year rise of 0.4%, compared to the forecasted levels of 0.8%. This has contributed to the losses made against the US dollar, where GBP/USD fell by over 1% in 24 hours.

This is unlikely to cause Bank of England policymakers any concern because they expect inflation to rise over the course of this year. This means that further monetary stimulus is unlikely which could lead to a stronger pound.

Key Movers

The US dollar traded higher against most of the major currencies on Tuesday despite weaker new home sales and cautious comments from Federal Reserve Chairman, Jerome Powell. Fed Chair, Powell, and Treasury Secretary, Yellen, participated in a congressional hearing yesterday to discuss the US economy.

Powell indicated that the US is experiencing a period of pent-up demand and made it clear that they see only a temporary rise in inflationary pressures. Both Powell and Yellen will appear before the committee later today, where more comments could fuel further gains for the dollar.

Expected Ranges

GBP/USD: 1.3680 - 1.3710 ▼

GBP/EUR: 1.1580 - 1.1605 ▼

EUR/USD: 1.1805 - 1.1835 ▼

GBP/AUD: 1.7955 - 1.8020 ▲