Markets Focus on UK Inflation

Monday’s trading provided a somewhat quiet start to what is now a very busy week ahead. With an absence of any key data releases around the globe, exchange rates traded within small ranges, primarily driven by the current technicals rather than any fresh news. The Euro dropped a little further against the US Dollar which aided a modest improvement in GBP/EUR towards the best rates seen so far this year. Adversely cable finished the day very much as it started with rates continuing to consolidate within a 1 cent range as it has done for around ten days now.

Traders are currently battling it out and are very unclear on the next direction for GBP/USD, although the week ahead should provide enough information for this pattern to change one way or another.

The busy week kicks off this morning with UK Inflation announced at 9:30 am. While an increase to 1.9% is forecast; there are no guarantees that any stronger figures will boost the pound. Typically higher inflation is tackled by the BoE with interest rate hikes, which in turn strengthens the currency.

However recently the BoE have been very open about their expectations for inflation to soar above the target rate, while also implying that rate hikes would not be necessary as levels are expected to return to target over a longer timeframe without policy adjustment. Growth figures for the Euro-zone will then be in focus at 10 am with no change expected from last month.

The rest of the week brings UK unemployment tomorrow and Retail Sales on Friday, as well as US Inflation and Retail Sales tomorrow. If you have a US Dollar requirement, in particular, this week then stay in close contact with your broker over the next 24hrs or consider securing the current levels which are only 2 cents off the best buying levels in the last four months.