GBP/EUR leaps half a cent on BoE comments

The pound enjoyed a sharp uptick in demand on Thursday in the wake of hawkish comments from a Bank of England (BoE) policymaker.
 
Sterling looks to be consolidating these gains so far this morning, with GBP/EUR stable at €1.1643 and GBP/USD rangebound at $1.4181. GBP/CAD is rangebound at C$1.7145, while GBP/AUD and GBP/NZD tick up to AU$1.8372 and NZ$1.9561, respectively.
 
Looking ahead, will a sharp increase in the Federal Reserve’s preferred indicator for inflation extend some support to the US dollar? Or be ignored due to the Fed’s current dovish bias?
 

What’s been happening?

The pound received a shot in the arm yesterday following remarks from BoE policymaker Gertjan Vlieghe.
 
Vlieghe said that he expects the next interest rate hike will come ‘well into’ 2022, but hinted that the BoE could start raising interest rates earlier in the year if the transition out of furlough is smooth and doesn’t trigger a sharp rise in unemployment.
 
Comments from European Central Bank (ECB) policymaker Pablo Hernandez de Cos had the opposite effect on the euro on Thursday as de Cos dismissed the recent rise in inflation as ‘transitory’.
 
The US dollar, meanwhile, struggled to attract support yesterday on the back of some mixed data releases, with a surprise slump in US durable goods orders last month offsetting better-than-expected GDP and jobless claims figures.
 

What’s coming up?

In the spotlight today we have the Federal Reserve’s preferred indicator for US inflation, the PCE price index.
 
While the release looks poised to confirm a sharp acceleration of domestic inflation last month, the Fed’s current dovish bias could limit any gains in the US dollar.
 
For EUR investors, the focus today will be on the Eurozone’s latest economic sentiment index. Analysts are forecasting that sentiment will have continued to improve in May, with the index beating the post-pandemic high struck in April and likely offering some support to the euro.
 
Finally, with UK economic releases still thin on the ground, any movement in the pound today is likely to be dictated by domestic coronavirus developments, as a further rise in new cases of the Indian variant will likely reflect poorly on GBP exchange rates.