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Markets await US CPI data

Daily Currency Update

The pound remains elevated versus both the dollar and the euro this morning as many major banks turn increasingly optimistic about its prospects for the rest of the year. With an economy holding up better than expected and at least two more interest rate hikes from the Bank of England priced into its value some, including Citibank, are predicting GBP/USD could top 1.30 by early 2024. If things work in its favour, it could get closer to that level by the end of this week with US Inflation data due this afternoon and the BoE's interest rate decision due tomorrow at midday. The BoE is predicted to hike again by 0.25% taking rates to 4.5% a level not seen since October 2008.

The commentary surrounding the decision from BoE Governor Andrew Bailey as well as the accompanying inflation and growth forecasts will likely be the main drivers of the pound. The voting split is expected to be 7-2 in favour of raising rather than holding so any deviation from that could also cause some volatility. GBP/USD is around 1.2625 with GBP/EUR just above 1.15, its highest-level year to date.

Key Movers

This week’s big data of note is due at lunchtime today from the US with the latest Consumer Price Index number released. Price rises for April were predicted to hold steady at 5% y/y with the core reading may be expected to drop a touch to 5.5%. Should this print lower than expected then it could be the final nail in the coffin for the Federal Reserve tightening cycle and persuade members of the Federal Open Market Committee (the panel that decides on whether to hold, raise, or lower interest rates) that's its job is done, and a pause is now needed whilst it assesses the impact on the economy. It’s another quiet day from the Eurozone with little data of note so EUR/USD value will be dictated by the US CPI print. It currently trades lower at 1.0960.

Expected Ranges

  • GBP/USD: 1.2540 - 1.2700 ▲
  • GBP/EUR: 1.1440 - 1.1570 ▲
  • GBP/AUD: 1.8630 - 1.8800 ▲
  • EUR/USD: 1.0880 - 1.1070 ▼