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UK consumer price inflation to set the pace for GBP exchange rates today

business-articlesUK consumer price inflation to set the pace for GBP exchange rates today
  • EUR: Outlook mixed – Eurozone Markit PMIs due imminently
  • GBP: Outlook positive – UK consumer price inflation at the forefront
  • USD: Outlook positive – US FOMC meeting minutes expected to be upbeat
Investors wait with bated breath for UK inflation results

The biggest mover for the pound (GBP) today will be the UK’s consumer price inflation figures, with analysts expecting a rise from 0.1% to 0.5% in April (month-on-month).

This will be all the more pertinent after yesterday’s hawkish monetary policy forecast from Bank of England (BoE) Policymaker Gertjan Vlieghe, who asserted that there could be as many as six rate rises over the next three years.

It should also be pointed out, however, that Brexit negotiations have resumed once more and headlines – positive or negative – will have the potential to push or pull the pound.

Euro (EUR) at risk of downside on today’s Eurozone PMI releases

Today’s round of flash purchasing managers’ index (PMI) readings out of the Eurozone will be closely scrutinised by investors - with many looking for signs that economic activity has recovered (or worsened) after the slowdown in Q1.

Analysts currently expect the May composite PMI reading to ease marginally from 55.1 to 55.0, with manufacturing expected to decline from 56.2 to 56.0 and services forecast to fall from 54.7 to 54.6.

Whilst these declines are rather minor, if they are confirmed then it would indicate that growth in the bloc has bottomed out – a situation that could push the European Central Bank (ECB) towards extending their bond-buying measures into next year.

This eventuality could severely weigh on demand for the euro.

US Federal Open Market Committee minutes imminent – what can we expect for USD?

The US dollar’s (USD) rally might have slowed on Tuesday, but today’s looming US Federal Open Market Committee (FOMC) minutes release could electrify it back into action.

Investors are currently predicting almost a 100% chance of a rate rise in June, and if the minutes from the latest meeting prove hawkish then this outlook could be compounded.

Beyond this, investors will be keeping a keen eye on US-China trade negotiations, with any further signs of agreement liable to propel the ‘Buck’.

Upcoming data

09:00 AUD – RBA Governor Lowe Speech
09:00 EUR – Markit Composite PMI Flash (May)
09:00 ZAR – South African Inflation Rate (April)
09:30 GBP – UK Inflation Rate (April)
14:45 USD – US Markit Composite PMI Flash (May)
19:00 USD – US FOMC Meeting Minutes
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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