Pound is showing symptoms of additional depreciation ahead of the August UK inflation report.
Pound (GBP) is trading cautiously at the start of this week, as investors remain concerned about the UK’s economic prospects. The Bank of England (BoE) is widely expected to raise interest rates again. With the decision to be revealed on Thursday. The Bank of England is unable to suspend policy tightening. Since inflationary pressures are persistent and wage growth momentum is robust.
Investors will be watching the BoE interest rate announcement with bated breath. Inflation data is expected on Wednesday. Because global oil prices have risen in the last four months. The headline Consumer Price Index (CPI) is likely to increase. Because of a higher labor cost index. Core inflation remains nearly steady. Market participants are unsure whether UK Prime Minister Rishi Sunak will keep his vow. To cut headline inflation to 5% by the end of the year. Sunak promised to cut inflation to 5% while headline inflation was in the double digits in January.
Daily Market Movers: The Pound Sterling is waiting for inflation data.
The pound appears fragile as investors become cautious. Ahead of the release of UK inflation data for August on Wednesday at 06:00 GMT.
Inflation is predicted to rise. Continue to rise as global oil prices have risen by more than 40% in the previous four months.
Rising energy costs are expected to accelerate headline inflation in the United Kingdom.
According to projections, the monthly headline CPI increased at a faster rate of 0.7% after dropping by 0.4% in July. Annual inflation is expected to rise to 7.1% in August, up from 6.8% in July.
The annualized core CPI, which excludes volatile oil and food prices, is expected to fall to 6.8% from 6.9% in July. Investors are nonetheless concerned about high core inflation caused by faster pay increases.
In general, Bank of England policymakers emphasize core inflation when making monetary policy decisions, although higher headline CPI might cause problems since family income would be squeezed due to greater out-of-pocket spending on gasoline and energy components.
Inflation figures for August will be followed by the Bank of England’s interest rate decision, which will be revealed on Thursday.
According to a Reuters poll, the Bank of England will raise interest rates by 25 basis points (bps) to 5.5% in its forthcoming monetary decision on September 21.
Aside from the September interest rate decision, investors want to know if the Bank of England would raise interest rates in November or wait to examine the impact of existing policy rates before making a decision.
Citigroup now anticipates that the Bank of England will suspend rate rises in November, as opposed to the 25 basis point increase previously predicted.
More interest rate rises by the Fed would exacerbate their effects on the industrial sector and labor growth. The British Chamber of Commerce (BCC) said on Monday that 46% of enterprises polled indicated the rate hikes had a negative impact, while 45% said they were not adversely harmed.
Pound market attitude in the United States remains cautious.
The pound market attitude in the United States remains cautious as investors await the Federal Reserve’s (Fed) monetary policy decision, which will be released on Wednesday. The Fed is generally anticipated to hold rates steady, despite declining inflation and a robust economy.
It will be interesting to see if the Fed can secure the economy on a path of declining inflation. While just slightly reducing growth. US Treasury Secretary Janet Yellen stated on Monday. That she sees no evidence of the economy entering a slump.
Despite the fact that the Fed is likely to maintain the status quo on Wednesday. The US Dollar Index (DXY) oscillates within Monday’s trading range. Meanwhile, 10-year US Treasury rates have risen beyond 4.3%. Ahead of the Fed’s policy announcement.
