The pound rallied on Wednesday as stronger-than-expected UK inflation figures trimmed Bank of England (BoE) interest rate cut expectations.
Sterling is consolidating these gains this morning, with GBP/EUR stable at €1.1754 and GBP/USD flat at $1.2725. GBP/CAD is rangebound at CA$1.7407, while GBP/AUD holds steady at AU$1.9209 and GBP/NZD dips to NZ$2.0809.
Coming up, will a robust UK services PMI extend the pound’s bullish momentum today?
What’s been happening?
The pound enjoyed notable support yesterday, following the publication of the latest UK consumer price index.
April’s CPI figures reported UK inflation cooled from 3.2% to 2.3%, beating forecasts it would slow to just 2.1%.
GBP exchange rates were propelled to multi-month highs as the stronger-than-expected inflation figures appeared to be enough for most investors to rule out a June interest rate cut from the Bank of England.
After struggling to attract support through Wednesday’s European session, the US dollar received a boost in the evening after the minutes from the Federal Reserve’s latest policy meeting revealed the bank may be open to a rate hike if inflation remains sticky.
Finally, the euro struggled to attract support through yesterday’s session amid ongoing speculation on whether the European Central Bank (ECB) will follow up an expected June rate cut with another in July.
What’s coming up?
Turning to today, this morning sees the publication of the latest PMIs from the UK and Eurozone.
The UK figures could provide another boost for the pound today if May’s preliminary figures report that growth in the service sector remains strong, as this may further undermine the case for a June interest rate cut from the BoE.
The euro may also strengthen with the release of the Eurozone’s own PMIs as they are expected to report an uptick in private sector activity within the bloc.
Meanwhile, this afternoon sees the publication of the latest US PMIs. While the S&P Global indexes aren’t as influential as the ISM releases, they could still drag on the US dollar if they point to a slowdown in the US economy this month.
