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UK inflation hits 6.2%

Wednesday 23 March, 2022

Daily Currency Update

The pound went on an impressive run yesterday pushing up towards the 1.33 handle and hitting a near two-week high rising as much as 0.7%. This morning we saw UK inflation figures released, with the cost of living rising by 6.2% in the last 12 months to February vs an expected 6.0%. This is the fastest that prices have climbed in over 30 years, with food, energy and fuel significantly increasing. After yesterday's run, the pound appeared to move very little this morning but could be susceptible to some movement today during Rishi Sunak’s budget announcement and Governor Andrew Bailey's speech. With inflation coming in above expectation, Governor Bailey's speech and Rishi Sunak’s budget announcement it could clear the way for further monetary tightening from the Bank of England going forward – which could prop the pound up today.

Key Movers

There were several key European Central Bank speakers in the spotlight yesterday and none were able to generate any momentum or headlines that could impact the markets and/or the euro. This likely suggests that the ECB will not be making any significant moves in regards to tightening of monetary policy, further increasing the divergence between the ECB and the Federal Reserve. The gap between the two central banks is likely to stunt the recovery of the euro for the time being and capping it from making any significant gains with the pair currently sat at 1.1010. From the US, Federal Reserve speakers will be the centre of attention today with Fed Chair Jerome Powell likely to discuss his thoughts on a potential 50bp hike that markets seem to have priced in. Given there is no other top tier market moving data from the US today we can expect this to be the main driver for the currency.

Expected Ranges

  • GBP/USD: 1.3205 - 1.3295 ▲
  • GBP/EUR: 1.1970 - 1.2055 ▲
  • GBP/AUD: 1.7695 - 1.7805 ▼
  • EUR/USD: 1.0990 - 1.1065 ▼