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Weekly Roundup: Pound rocked by UK CPI

Philip McHugh May 30th 2023 - < 1 minute read

After a muted start to the week, Sterling faced mixed movement on Tuesday. Weaker PMI data dented GBP before an upgraded UK economic forecast from the International Monetary Fund (IMF) helped it regain some ground.

Midweek, the UK’s latest consumer price index injected the pound with volatility. Headline inflation eased sharpy but core inflation shocked markets by spiking to a 31-year high.

This eventually saw traders price in more aggressive action from the Bank of England (BoE), helping the pound remain afloat through Thursday’s session despite a risk-off market mood.

GBP then found some success on Friday as UK retail sales exceeded forecasts and risk appetite recovered.

So far this week, Sterling has started on the front foot, with BoE interest rate rise bets lifting the British currency. Some analysts suggest that the bank may hike rates as high as 6%.

UK economic data is in short supply, however, so the pound may find its movement limited as the week unfolds.

Risk appetite could also impact GBP exchange rates. If the market mood improves, Sterling could firm against its safer peers while dropping against its riskier rivals.

Written by
Philip McHugh

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