The uptrend is still intact! For the fourth straight day, the British pound rallied as a stronger than expected CPI figure lifted GBP/USD up another 80 pips. Against the yen, the pound was equally impressive as it put up a 53-pip gain.
U.K. CPI clocked in at 4.4% last month, besting the consensus forecast which called for a 4.3% rise in prices. Details of the report revealed that increases in the price of clothing, housing maintenance, and rent led the way. Interestingly enough, the market’s initial reaction to the report wasn’t as bullish as you’d think. It actually took a few hours before the pound started to make headway. But when it started to rally, boy did it rally!
In other news, BOE Governor Mervyn King shed more light on the U.K.'s economic situation. But truth be told, he didn’t say anything we hadn’t heard before. He reiterated that uncertainty in the euro zone continue to threaten U.K. growth. And like a broken record, he also said that he expects inflation to peak at 5% in the coming months before it eases, blaming “temporary” factors such as energy costs for the rise in inflation.
If you thought yesterday was a big day, wait 'til you see what the U.K. has in store for us today!
At 8:30 am GMT, all hell will break loose! We have U.K. employment data coming out then, as well as MPC meeting minutes.
According to forecasts, July probably saw an increase of 20,100 in the number of individuals claiming unemployment benefits, down from 24,500 the previous month. Employment gains in the services sector are expected to be countered by losses in the production sector. However, this isn’t expected to move the unemployment rate, which currently stands at 7.7%.
As for the MPC meeting minutes, people are expecting no changes to be made to the number of hawks and doves. Forecasts say we should still see 2 votes for rate hikes and 7 votes against rate hikes. But be ready to act in case results deviate from expectations!