Pound firms following UK inflation release

The pound trended higher on Wednesday, as core inflation in the UK remained stubbornly high in July.

Sterling is consolidating these gains this morning, with GBP/EUR stable at €1.1705 and GBP/USD flat at $1.2733. GBP/CAD is rangebound at CA$1.7219, while GBP/AUD ticks up to AU$1.9889 and GBP/NZD holds steady at NZ$2.1475.

Coming up, will a fall in US jobless claims propel the US dollar higher today?

What’s been happening?

The pound strengthened against most of its peers during yesterday’s session, following the publication of the UK’s consumer price index.

July’s CPI figures reported headline inflation slowed from 7.9% to 6.8% as forecast. However, core inflation remained unchanged at 6.9%, rather than falling to 6.8% as predicted.

Signs that underlying inflation may be stickier than previously thought led the pound to rise, amid speculation it would push the Bank of England (BoE) to keep tightening its monetary policy.

At the same time, the euro was supported by some upbeat EUR data on Wednesday, A surprise uptick in Eurozone industrial production, in addition to confirmation of a robust expansion of GDP in the second quarter, helped to underpin the single currency.

After trading listlessly through the European session, the US dollar jumped yesterday evening, following the publication of the minutes from the Federal Reserve’s July policy meeting.

The minutes were broadly hawkish in tone. Policymakers reiterated their commitment to returning inflation to the Fed’s 2% target and warned that further action may be needed amid lingering inflation risks’

What’s coming up?

The only data of note today will be the latest US initial jobless claims.

Today’s data is expected to report a modest fall in the number of new unemployment claims being filed last week. Will signs of resilience in the US labour market bolster Fed rate hike bets and lift the US dollar?

With Eurozone data thin on the ground, any movement in the euro may be tied to its negative correlation with the US dollar. Potentially leading EUR to weaken if USD strengthens.

GBP investors will have time to properly digest both the UK’s latest jobs report and inflation print. Potentially leading the pound to extend its gains if BoE rate hike bets grow.