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GBP – Markets await US inflation data

Daily Currency Update

GBP - British Pound

Sterling has been little moved since the start of the week, propped up by comments from Bank of England Governor, Andrew Bailey, that the UK should expect interest rate hikes in the coming months in an effort to combat the recent spike in energy costs, and rises in the prices of other goods and services also.

This morning saw UK GDP for July to August expand at 0.4%, slightly less than markets were forecasting. To offset this slight miss both Industrial Production and Manufacturing beat estimates for the same period and sterling is holding steady as a result. GBP/USD trades at around 1.3610 with GBP/EUR around 1.1785

Key Movers

Stock markets have slipped into the red this morning, posting some small losses likely due to some nerves ahead of another key US inflation reading. September’s Consumer Price Index is due for release at 1:30pm with the overall reading expected to rise 0.3% m/m and the core number (which excludes food and energy costs) expected to rise 0.2%. As usual anything higher than forecast will likely benefit the US dollar as it will add to the argument that higher interest rates are needed to control this year’s sharp rise in prices. Conversely an undershoot will likely see the dollar lose value and stock markets reverse this morning’s drop. US inflation has been a key area of focus throughout 2021 with members of the rate setting Federal Open Market Committee reluctant to act on what they see as a "transitory" rise in prices on the back of this year’s economic rebound. That mantra has continually been tested however and it seems we could get confirmation that the Federal Reserve will start to taper its Coronavirus support programmes over the coming weeks. This evening the minutes from the last Federal Open Market Committee policy decision are due to be published which will likely also gain much attention. EUR/USD is close to its lowest level since July 2020, currently sat around 1.1550.

Expected Ranges

  • GBP/USD: 1.3540 - 1.37 ▲
  • GBP/EUR: 1.1740 - 1.1845 ▲
  • GBP/AUD: 1.8460 - 1.8640 ▲
  • GBP/NZD: 1.9535 - 1.9710 ▲
  • GBP/CAD: 1.6910 - 1.7030 ▲