The pound extended its tentative rebound versus the dollar on Tuesday, helping it to edge further away from a March 2020 low of 1.1934 touched last week.
Hawkish rhetoric from Bank of England (BoE) policymakers continued to support the UK currency. The central bank’s chief economist Huw Pill said it would need to lift interest rates further soon to rein in surging inflation.
Speaking to the Institute of Chartered Accountants in England and Wales, Pill said: “We will do what we need to do to get inflation back to target. And at least in my view, that will require further tightening of monetary policy over the coming months”.
This marked a slight change of tack for Pill who has previously called for a “steady-handed” approach to rate rises.
British house prices touched a high for the fifth consecutive month in June. However, there was a noticeable deceleration in the pace of price growth, the latest Rightmove House Price Index showed on Tuesday.
The average price of property coming to market in June increased by 0.3% (£1,113) – the smallest growth since January – to reach £368,614. Prices rose 9.7% year on year, down from the 10.2% annual increase posted last month.
Speaking after the release, Tim Bannister, Director of Data Services at Rightmove, said: “The exceptional pace of the market is easing a little, as demand gradually softens and price rises begin to slow, which is very much to be expected given the many record-breaking numbers over the past two years.”
Dollar remains subdued
The dollar remained on the back foot on Tuesday amid an uplift in risk appetite that stymied demand for the safe-haven currency. An equity rally appeared to boost investor confidence – and the risk-sensitive pound with it.
The Federal Reserve Bank of Chicago’s National Activity Index dropped to 0.01 last month from 0.4 (revised from 0.47) in April. This print shows that the US economy expanded at its historical average in May.
Economists expect Wednesday’s CPI inflation gauge to show UK consumer price growth hit 9.1% on an annual basis last month. That would represent a slight uptick from the 40-year high of 9% touched in April.
Fed Chair Jerome Powell will give his twice-yearly report on monetary policy to the US Senate on Wednesday, just a week after the central bank announced its biggest interest rate rise in nearly 30 years in a bid to tackle soaring consumer prices.
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