Pound sterling exchange rate

The pound fluctuated in trade yesterday as markets reacted to mixed comments from the Bank of England before the UK’s Treasury Committee.

Trade in Sterling appears to be mixed again this morning, while GBP/USD has been hit by heavy losses, falling to $1.3382, GBP/EUR is steady at €1.1393, GBP/CAD also holding at C$1.224. Meanwhile GBP/AUD and GBP/NZD are both strengthening, rising to AU$1.7768 and NZ$1.9407 respectively.

The UK will publish its latest CPI figures later this morning, with a surprise uptick in inflation possibly leading the pound to push higher…

What’s been happening?

The pound initially jumped at the start of the European session on Tuesday as BoE policymaker Gertjan Vlieghe opined that there could be up to six rate hikes from the bank over the next three years.

However Sterling was quickly brought crashing back to Earth as the BoE’s Governor told the UK’s Treasury Committee that households were now £900 worse-off than before the Brexit vote.

Combined with some weaker-than-expected industrial order figures from the Confederation of British Industry, this painted a pretty gloomy picture of the UK economy.

Meanwhile the GBP/EUR exchange rate continued to be impacted by the growing political uncertainty in Italy, with the latest development seeing questions being raised over the coalition government’s nomination for prime minister, the little-known Giuseppe Conte.

Not only are markets concerned about Conte’s apparent lack of political experience, but doubts were also raised over his academic credentials as New York University told the media it had no record of Conte ever attending, despite him claiming he had.

At the same time the GBP/USD exchange rate fluctuated on Tuesday, with the pairing initially strengthening following a pullback in the US dollar amid a bout of profit taking.

However the pairing had relinquished all of its early gains by the end of the session, suggesting the dollar bulls may have begun to emerge once again.

What’s coming up?

The pound may rally this morning, following the release of the UK’s latest CPI figures.

While economists currently forecast inflation will have remained flat in April, the recent surge in oil prices could see an uptick in headline inflation.

This may strengthen Sterling sentiment if it is seen as bolstering the chances of the BoE still raising interest rates this year.

Meanwhile the euro could be forced lower this morning with the publication of the Eurozone’s latest PMI figures, with a further slowdown in private sector growth likely to drag on the single currency.

Finally the US dollar could also see some movement later this evening, as the Federal Reserve releases the minutes from its most recent policy meeting.

Investors will be looking for any hints the bank might seek to speed up its monetary tightening, which could prompt USD to rocket if policymakers appear open to raising interest rates up to three more times this year.