Pound rallies as UK prices surge further

Sterling has jumped higher this morning after UK inflation figures came in higher than expected.

The data showed that prices increased 2.9% in August versus last year, which is the highest we’ve seen in 5-years. Clearly this is quite a way over the BoE’s 2% target, adding pressure onto the BoE to act in order to help households deal with reducing spending power. The BoE meet this week and we shall see the result of their vote this Thursday. Although they’re not expected to make any changes, traders will be keeping a close eye on the vote and also the general tone of the meeting for further direction.

Generally, the headlines surrounding Brexit have been pretty negative lately, however, the Pound hasn’t been hit by this which suggests that investors have largely priced-in a worst case scenario for Brexit (for now). Therefore, any further positive UK news/data might help Sterling claw back some further ground. On top of this week’s BoE vote, we also have key wage figures tomorrow morning and then retail sales on Thursday.

The USD remains on the backfoot due to pessimistic comments from Fed policymakers and the ongoing North Korea tensions. The Euro remains relatively strong against most currencies (less so for Sterling), as the ECB look set to announce a reduction in their quantitative easing efforts next month.

As a result, we have hit fresh 1-year high against the USD which has moved up around 1-cent this morning. The GBP/EUR bounced nearly 1-cent higher on today’s data and now trades at a 4-week high