Pound firms amid uptick in core UK inflation

Philip McHugh September 15th 2022 - 2 minute read

The pound rallied on Wednesday as GBP investors welcomed the publication of the UK’s latest inflation figures.

Sterling’s momentum has not carried into today’s session however, with GBP/EUR muted at €1.1564 and GBP/USD subdued at $1.1522. GBP/AUD has slipped to AU$1.7052, while GBP/CAD and GBP/NZD hold steady at C$1.5182 and NZ$1.9185, respectively.

Looking ahead, will another underwhelming US retail sales release infuse volatility into the US dollar this afternoon?

What’s been happening?

The pound stuck higher against most of its peers yesterday following the publication of the UK’s consumer price index.

August’s CPI figures reported a surprise drop in headline inflation but saw core inflation climb to a new 30-year high.

The uptick in underlying inflation was seen as placing more pressure on the Bank of England (BoE) to keep raising interest rates and buoyed GBP exchange rates.

The US dollar, meanwhile, relinquished some ground on Wednesday, as USD investors sought to book their profits following a sharp appreciation on Tuesday.

At the same time, the euro was buoyed by its negative correlation with the US dollar, although a weaker-than-expected Eurozone industrial production release capped the upside in the single currency.

What’s coming up?

Turning to today’s session, the spotlight is likely to be on the latest US retail sales figures.

This afternoon’s release is expected to report US sales growth stagnated for the second consecutive month in August.

While the stall in sales growth is unlikely to be welcomed by USD investors, concerns over US economic growth and its wider impact on the global economy could still see traders favour the safe-haven US dollar this afternoon.

Meanwhile, the pound may trade sideways today. In the absence of any trading stimuli, the subdued mood ahead of the Queen’s funeral could limit movement.

On the other side of the Channel, EUR investors may focus on developments in Ukraine. Hopes for a swifter end of the war could be bolstered if Ukrainian forces are able to maintain their current momentum, lifting the euro in the process.

Written by
Philip McHugh

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