Home Daily Commentaries Pressure mounts on Bank of England

Pressure mounts on Bank of England

Daily Currency Update

GBP - British Pound

After better-than-expected inflation data released from the UK on Wednesday, there is growing pressure on the Bank of England (BoE) to hike interest rates next year.

Analysts are suggesting that two separate hikes in 2022 is the most appropriate course of action for the BoE, with the first coming in May and second towards the end of the year. Generally speaking, a rate hike should strengthen the pound, as foreign investors look to take advantage of higher yielding rates in the UK, meaning demand for the currency increases.

The pound now sits just above the $1.38 handle against the US dollar.

Key Movers

The debate continues in the US as to whether current inflation levels are healthy and transitory or rapidly turning into stagflation. Fed Chair Jerome Powell remains on the transitory side of the debate. However it is likely that the pressure will continue to grow against Powell, and that rates may be hiked. Investor eyes will likely watch the US Retail Sales data released on Thursday afternoon, which like CPI and Import Prices, is now expected to miss it's predicted reading. If it does miss, the safe haven US dollar will likely be pushed higher.

In other news, the euro is currently under pressure as the German election uncertainty weighs on the Eurozone currency. Chancellor Angela Merkel is stepping down after 16 years and there is expected to be a fragmented parliament on the horizon. This could impact the euro as with uncertainty, investors could look to other financial vessels to store their funds. With the election, on 26th September, there could be more volatility for the euro than usual, particularly in the few days prior.

Expected Ranges

  • GBP/USD: 1.3740 - 1.3900 ▼
  • GBP/EUR: 1.1680 - 1.1810 ▲
  • GBP/AUD: 1.7390 - 1.7560 ▼
  • GBP/AUD: 1.8770 - 1.9010 ▼