Good afternoon,
Despite difficult market conditions, the pound retreated yesterday to regain the 1.1750 mark against the euro and continued its rally early in the session this morning. GBPUSD has been fairly calm throughout the week as we head towards the all-important MPC interest rate decision tomorrow. EURUSD found itself struggling to regain 1.1300 after the US PPI gave the dollar further momentum yesterday afternoon.
At 7am this morning the UK CPI was released, showing inflation hit ten-year highs at 5.1%, beating market expectations by 4.7%. This is well above the Bank of England’s 2% target inflation rate and continues to increase pressure on the central bank to raise interest rates, although it is widely expected that the BoE remains at 0.1% tomorrow. The spread of the Omicron variant may well prevent any rate hikes until the threat subsides.
Today, the Fed’s monetary policy statement will be released at 22:30 GMT. Investors expect a monthly decrease of $ 30 billion in asset purchases. In the UK and EU, interest rate decisions are expected to be released tomorrow at 3:30 p.m. for the BoE and 4:15 p.m. for the ECB, they will be watched very closely with any deviations that could cause volatility within steps.
Have a nice day.
Thomas Read, Senior Director of Relations.
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