The June CPI report, released this morning, showed that things continue to move slowly on the disinflation front in the UK. Headline, core and services inflation were all unchanged from May, despite expectations of a marginal slowdown, it said. Francesco Pesole, FX Strategist at ING.
The pound sterling strengthens
“We know that services inflation is what the Bank of England (BoE) is primarily focused on at this stage, and stabilisation at 5.7% year-on-year in June does not support any further easing bets ahead of the 1 August meeting.”
“Sterling is understandably trading on the strong side this morning as markets are pricing in some dovish repricing in the curve. There is now -9bp priced in for August versus -12bp before the release, and the year-end priced in is 48bp of rate cuts.”
“The long-standing call from our economists has been for the BoE easing cycle to start in August, but we admit that the odds are somewhat lower after this morning’s CPI report. Markets may also gradually price in a move in August over the coming weeks, which would make a potential cut a very negative event for the Pound. For now, long-term EUR/GBP bulls like us will be happy to see the pair hold around 0.8400.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
