How will GBP respond to UK inflation figures?

Although the pound struggled against some of the majors last week, it benefited from positive UK data on Friday and began Monday’s session in a slightly stronger position, registering modest gains against the euro, Australian dollar and New Zealand dollar.

The GBP/EUR exchange rate has recovered to €1.0986 after sliding last Thursday, GBP/USD has advanced all the way to $1.3190, GBP/AUD has gained 0.3% to trade in the region of AU$1.6417, GBP/NZD has bounced back to NZ$1.8191, and GBP/CAD has recovered from last week’s worst levels to trade in the region of C$1.6011.

What can we expect from the currency market today? Keep reading to find out…

What’s been happening?

Last week two central bank interest rate decisions caused the biggest market moves.

Firstly, the Bank of Canada (BOC) sent Canadian dollar exchange rates surging after delivering an unexpected interest rate hike on Wednesday.

Secondly, the European Central Bank (ECB) bolstered the euro despite making no changes to monetary policy.

A positively revised growth figure for the Eurozone and hints that the tapering of quantitative easing would be discussed in October were enough to boost the euro against peers like the pound and US dollar.

Meanwhile, demand for the pound was undermined by less-than-impressive UK construction and services PMIs.

Friday was a bit more positive for the British currency however. Better-than-forecast manufacturing production figures and a fairly upbeat Q3 growth estimate from the National Institute of Economic and Social Research allowed Sterling to recoup some of its losses before the weekend.

What's coming up?

Tomorrow’s UK inflation figures are the big news to be aware of. As it stands, the nation’s consumer price index is expected to rise by 0.5% on the month, which would take the annual figure from 2.6% to 2.8%.

As such a result might encourage the Bank of England (BoE) to discuss a near-term interest rate hike, GBP exchange rates could rally tomorrow.

However, if the inflation stats fall short of forecasts, the pound could be pressured lower.

Other news to be aware of tomorrow includes Australian business conditions/business confidence figures and a speech from European Central Bank (ECB) Vice President Vítor Constâncio.

High-profile US news is lacking until later in the week, but the impact of Hurricane Irma may influence the direction taken by USD exchange rates.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Phil McHugh,
Trading Floor Manager

Phil provides dealing and hedging services whilst also helping to manage Currencies Direct overall market exposure.