The British pound is in play this week. Having hit another 26 year high today, the GBP/USD is now less than 150 pips away from the psychologically important 2.05 level. With so much economic data on the calendar, we will either see a top or a move towards 2.10 over the next four trading days. Tomorrow?s report on consumer price growth will be the first piece of key economic data to come out. The combination of a drop in producer prices and a strong currency suggests that consumer price growth will slow as well.
However even though the recent strength of the British pound is expected to push inflation lower, UK economic data has a habit of catching everyone by surprise. Traders will be using the CPI number to forecast whether Wednesday?s release of the BoE minutes from the meeting held earlier this month will be pound positive or negative. The minutes have become extremely market moving - if you recall, the turn that we saw in the middle of June was triggered by surprisingly hawkish MPC minutes. A near unanimous decision to raise rates would accelerate further gains, while more than 2 dissenting votes would probably be construed as dovish, which would mark a top in the currency pair.