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Pound firms as UK inflation rockets to 30-year high

currency-newsPound firms as UK inflation rockets to 30-year high
The pound traded with modest gains on Wednesday, after the UK’s consumer price index printed at a 30-year high.

Sterling so far appears to be consolidating these gains this morning, with GBP/EUR flat at €1.1950 and GBP/USD stable at $1.3597. GBP/CAD is rangebound at C$1.7267, while GBP/AUD and GBP/NZD hold steady at AU$1.8864 and NZ$2.0289, respectively.

Looking ahead, the absence of any major data releases today could see the US dollar bolstered by the publication of the latest US initial jobless claims later this afternoon.

What’s been happening?

The pound ticked higher during yesterday’s trading session, with the currency being buoyed by the UK’s latest CPI release, which reported domestic inflation unexpectedly accelerated from 5.4% to a 30-year high of 5.5% in January.

The latest jump in inflation is seen as piling more pressure on the Bank of England (BoE) to continue raising interest rates, with analysts forecasting the next rate hike is likely to come in May.

However, the continued acceleration of inflation also fuelled concerns about the UK’s cost-of-living crisis, which capped Sterling’s gains.

The euro, meanwhile, fluctuated on Wednesday amidst uncertainty over the situation in Ukraine.

EUR exchange rates were initially buoyed by Russia’s claim it was withdrawing some of its military units from Ukraine’s border, however these gains were later reversed after Nato refuted this and suggested Russia is actually still bulking up its forces in the area.

This uncertainty over the Ukraine crisis, coupled with a stronger-than-expected US retail sales print helped to bolster the US dollar during Wednesday’s European session, before some dovish FOMC minutes reversed these gains later in the evening.

What’s coming up?

Looking ahead, the publication of the latest US initial jobless claims will be the most high-impact data release of the day.

This could see the US dollar buoyed by another expected fall in new jobless claims last week.

Meanwhile, EUR investors will look to a speech by European Central Bank (ECB) policymaker Philip Lane for fresh impetus today. Expect to see the euro weaken if Lane reiterates the bank’s cautious policy outlook.

Finally, the absence of any notable GBP data releases today could see the pound struggle to find momentum today, particularly amidst ongoing political jitters and Brexit uncertainty.
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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