Good morning,

Concerning inflation data was the topic of conversation yesterday as Bank of England chief Andrew Bailey spoke with the Yorkshire Post about the UK economy. Tracking above the key target rate at 2%, the Governor was quoted as saying, “We are going to have a very delicate and challenging job on our hands so we have got to, in a sense, prevent the thing becoming permanently embedded because that would obviously be very damaging. Unfortunately, if you look at our last forecast, it is going to go higher, I am afraid.”

Off the back of these comments the pound has bounced this morning at the open, as these comments support a more hawkish stance to increasing interest rates within the UK. As mentioned on many previous occasions, the UK is looking like the first major economy to increase interest rates post the COVID-19 pandemic. Taking a huge step forward from record-lows, following two emergency cuts, interest rates are the main drivers in FX flow globally.

The calendar is looking light today, especially with the US on a public holiday. It is worth noting, due to Columbus Day, USD payments cannot be routed for today’s value date. Early tomorrow morning will see the UK unemployment rate released. Despite this being a backdated figure, traders will be keeping a keen eye on its release for insights relating to the health of the labour market, where there are a reported 1.2m vacancies at present.

Have a great day.

Author: Jack Nicholls, Senior Relationship Manager.

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