UK inflation could put pressure on Bank of England
Thursday 20 April, 2023
Daily Currency UpdateUK CPI printed a reading above 10% for the second consecutive month in a row, suggesting the Bank of England could have work on its hands to control inflation, and the market speculating that the interest rate peak in the UK may now be above 5% before the central bank stops raising. Tomorrow's release of UK March retail sales and April PMIs will be a good indicator of how the UK economy is coping with a higher interest rate environment, and may give clues to the Bank of England on how much more the economy can cope with rate hikes.
Key MoversThe recent banking crisis in Europe, which threatened to derail the economy in the single bloc, appears to not have such an impact in the economy as once thought. Today we could see some insights into the latest ECB thinking with the 12.30pm release of the minutes of their last 16th of March meeting. In this meeting the ECB pushed ahead with a 50bp hike in the midst of the banking turmoil, and the rationale released today will give an insight into Lagarde's thinking.
Last night's release of the Fed's Beige Book (a report from Fed members on economic climate) ahead of the 3rd of May FOMC meeting did not show a material weakening in activity after the failures of two US banks in early March. The report should not interfere too much with the market's 89% probability pricing of a 25bp Fed hike on 3rd of May and does not seem to provide much fuel yet to the recent anti US dollar narrative.
- GBP/USD: 1.2380 - 1.2465 ▼
- GBP/EUR: 1.1290 - 1.1365 ▲
- GBP/AUD: 1.8490 - 1.8670 ▲
- EUR/USD: 1.0910 - 1.0985 ▲