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Sterling higher as markets weigh on inflation data

Wednesday, Aug 19 2015
There were no data releases from the UK this morning. Markets are still pricing yesterday CPI figures. To remind ourselves inflation beat expectations – year-on-year inflation now sits at 0.1%, ahead of predictions for a reading of 0%. Note that wages are rising and this will inevitably feed into the inflation profile in coming months. Consumers should not get used to the present conditions.
 
The Bank of England is wary of the prospect of higher prices in coming months and for this reason could look to regulate economic growth by raising interest rates. Higher interest rates will attract foreign currency into the UK, thus boosting the value of the pound sterling.
 
In its latest economic outlook, the BoE predicted that the U.K.’s rate of inflation will not reach its 2 percent target again until the third quarter of 2017. Low oil, food and imported goods prices account for much of the drag on inflation, according to the bank’s governor Mark Carney.
 
Sterling is currently being traded around 1.5680 area. Pair is likely to find support around 1.5630 level and resistance above 1.5720 area. Later today, in the US session, CPI figures and FOMC Meeting Minutes are scheduled for a release.
More in this category: « GDP growth for G20 likely to slow to 2.7% this year US CPI rose less than expected »

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