Over the coming week, GBPUSD traders will be assessing the impact from the latest inflation readings out of either side of the pond, along with a crucial Bank of England rate decision.
Red-hot inflation remains a scourge for the global economy, undermining its post-pandemic recovery. In response, central bankers have been furiously hiking interest rates in other to tame runaway consumer prices.
Over the coming week, GBPUSD traders will be assessing the impact from the latest inflation readings out of either side of the pond, along with a crucial Bank of England rate decision:
Monday, September 12
Tuesday, September 13
Wednesday, September 14
Thursday, September 15
Friday, September 16
And here are the market forecasts for the following key events:
Still, the core CPI year-on-year figure is expected to come in at 6.1% – its highest since April. That suggests that the Fed’s battle against inflation is far from over.
Yet another higher-than-expected CPI reading would only darken the economic outlook for the UK, and underscore the tremendous battle facing the Bank of England.
A 75bps hike would also help the BOE keep up with similar moves already made recently by its major peers such as the US Federal Reserve and the European Central Bank.
Ultimately, GBPUSD traders may face a range of scenarios, depending on how those CPI prints and the keenly-awaited BOE rate decision play out:
At the time of writing, GBPUSD is enjoying some relief as it pokes its head back above 1.160 while pulling away from its lowest since 1985.
However, GBPUSD’s upside remains significantly capped by the negative sentiment surrounding the UK economic outlook, with markets currently pricing in a greater chance (34.3%) that ‘cable’ would trade back below 1.15 rather than back above 1.17 (30.9%) over the coming week.
Much would depend on the actual CPI figures, and the Bank of England’s official decision and comments surrounding its path forward for UK interest rates.
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Lukman Otunuga is a research analyst at FXTM. A keen follower of macroeconomic events, with a strong professional and academic background in finance, Lukman is well versed in the various factors affecting the currency and commodity markets.