Good morning,
The pound has continued to move higher against the other major currencies this morning after yesterday’s gains as the BoEs chief economist Huw Pill says that inflationary pressures and expected higher wage growth in the UK means further interest rate hikes are to come with guidance pointing towards 1.0% by December. This is why there was a close call not to go ahead on a 50 basis point raise last week. He mentioned leaving rates where they currently are at 0.50% will keep inflation above the targeted 2% level while a move to 1.20% by December would leave inflation below target. We’ll need to now watch the FED for how they act.
The US dollar counters the pounds moved back up above 1.3550. As for the euro, it continues to hold the 1.1400 level against the USD while the market waits for moves from both the ECB and FED. January inflation data from the US will begin to guide the outlook for rate hikes from the FED, whilst it seems the ECB will be taking a slower approach to rate hikes, but are expected to look to go ahead with at least one this year to manage EU inflation.
Later today, we have the US CPI for January and US initial jobless claims both released at 1.30pm.
Have a great day.
Chris Allan, Senior Relationship Manager
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References
https://www.fxstreet.com/economic-calendar
https://www.poundsterlinglive.com/economics/16541-bank-of-england-s-pill-bank-rate-headed-to-1-0