Tomorrow morning UK inflation rates will be released in the early hours in what appears to be the most important economic release this week, at least for the UK markets and the Pound.
The inflation figures are measured in the form of CPI (Consumer Price Index) and as this release can impact monetary policy adopted by the Bank of England, the release carries the potential to influence the currency markets.
The expectation is for an annualised CPI figure of 8.2% to be released for June. This is a decline from the previous months figure of 8.7% but still above the Bank of England’s June forecast of 7.9%.
The 8.2% prediction will be key, as if the rate of inflation remains above this level it increases the chances of future interest rate hikes. This expectation of further rate hikes has resulted in the Pound climbing in recent months.
Whilst the UK economy isn’t thriving the Pound has been due to the 13 consecutive interest rate hikes carried out by the BoE (Bank of England), with expectations of further hikes as soon as next month.
The current expectation is for the base rate of interest to reach at least 6% by the end of the year, and tomorrows data release could determine whether or not this happens hence the build-up within the finance world to tomorrow’s release.
There could be a drop in the Pounds value if the figure released is below 8.2% as if inflationary pressures ease, there may not be the need for the BoE to continue hiking exchange rates.
Economic policy, and its anticipated direction has been the main driver of GBP exchange rates recently. This contrasts with the past 5-years or so when politics was most certainly the main driver of GBP exchange rates due to Brexit.
Do register your interest with us if you’re planning on making a currency exchange involving the Pound and wish to be kept updated regarding potential market movements.
