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GBP/USD jumps over half a cent as UK inflation surges

currency-newsGBP/USD jumps over half a cent as UK inflation surges
The pound rallied on Wednesday, as GBP investors welcomed a stronger-than-expected UK inflation print.

Meanwhile, Sterling is mostly muted so far this morning, with GBP/EUR flat at €1.1701 and GBP/USD subdued at $1.3845. GBP/CAD is rangebound at C$1.7343 while GBP/AUD and GBP/NZD hold steady at AU$1.8516 and NZ$1.9715 respectively.

Looking ahead, we may see the pound struggle to extend its gains today, in light of a mixed UK jobs report.

What’s been happening?

The pound was the top performer during yesterday’s European trading session, following the publication of the UK’s latest consumer price index.

June’s CPI figures revealed domestic inflation shot up to 2.5% versus 2.2% forecast. This prompted GBP investors to speculate on whether this could force the Bank of England (BoE) to rethink its current dovish policy stance.

The US dollar, meanwhile, retreated on Wednesday, following prepared remarks by Federal Reserve Chair Jerome Powell for his testimony in front of Congress, in which he suggested the US economy is ‘still a ways off’ the point at which the Fed can begin tapering its stimulus measures.

This downside in the US dollar lent some support to the Euro yesterday, thanks to the strong negative correlation between the pairing, and also capped the downside in EUR exchange rates in the wake of the Eurozone’s underwhelming industrial production release.

What’s coming up?

Turning to today’s session, the initial focus will be on the UK’s latest jobs report.

May’s release saw a surprise rise in the unemployment rate, while wage growth rocketed up to a record high of 7.3%, with the mixed figures potentially leaving the pound without any strong directional bias today.

In the absence of any notable Eurozone data releases, movement in the euro may be driven by European coronavirus developments, potentially limiting the upside potential of the single currency amidst concerns over the rapid spread of the Delta variant throughout the continent.

On the other side of the pond, the publication of last week’s initial jobless claims could boost the US dollar if claims dropped as expected, although any gains may be tempered by the subsequent release of June’s US industrial production figures, which are forecast to report a modest slowing of output.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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