The British pound is under further pressure today after yesterday’s disappointing inflation figures which has now seemingly taken an interest rate hike off the table by the Bank of England and sets the currency up for further losses.
In recent weeks there has been speculation that the BOE would raise rates in the nearest future to tackle rising inflation, but with yesterday’s CPI numbers coming in at 2.6 percent against analysts’ expectations for a figure of 2.9, percent the central bank is not under so much pressure to tighten monetary policy.
"We think the impact of GBP depreciation following the EU referendum has now fully passed through to prices and in the context of low rates of wage growth, headline inflation has peaked," says Hamish Pepper at Barclays.
The market had already priced in a rate hike which is why the pound hit a 10 month high of $1.3114 against its US counterpart last Friday, so the inflation figures caught the market by surprise,
"The CPI data took the wind out of the pound rally. It was having stabs at the level of 1.31 for the past few trading sessions but that is in the rear mirror now” noted Naeem Aslam, chief market analyst at Think Markets.
"The data has reduced the pressure on the BOE to change their monetary policy; the bank can focus more on a more pressing issue which is Brexit and gear their policies which can ward off any negative effects”. He added.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66% of retail investor accounts lose money when trading CFDs with this broker. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66% of retail investor accounts lose money when trading CFDs with this broker. Before deciding to trade foreign exchange you should consider whether you understand how CFDs work, your investment objectives, your level of experience and readiness of taking risk. The possibility exists that you could sustain a loss of some or of all of your initial investments and therefore you should not risk more than you are prepared to lose. Please seek independent financial advice if necessary.
|By clicking "Continue" you will be redirected to the website operated by FIBO Group, LTD company registered in BVI and regulated by FSC. Please familiarize yourself with the Customer Agreement through the link. Click "Cancel" to remain on this page.|