British Pound to US Dollar (GBP/USD) Exchange Rate Bullish after UK Inflation Data
The British Pound is currently trading up against the US Dollar at 1.7155, following the release of upbeat UK data early on Tuesday morning.
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The UK performed positively with the release of its Consumer Price Index which shows that inflation beat forecasts of 1.6%, with the actual figure presenting itself at 1.9%.
The Pound will no doubt see great strength in its gains as Tuesday’s inflation data is the strongest since the beginning of 2014 and has shown a dramatic rise in June, in comparison to May’s more than four year low-point of 1.5%.
Sterling is proving to be buoyant, making the most impressive gains since the governor for the Bank of England, Mark Carney, suggested that interest rate rises could occur sooner than expected.
Sterling has appreciated a minimum of 0.4% against all 16 other major currencies, causing encouragement for investors in the Pound.
The GBP/USD currency pairing has seen highs of 1.7173 and lows of 1.7057 this session as the US awaits the chairwoman of the Federal Reserve, Janet Yellen’s Semi-Annual Testimony to the Senate Committee.
Market analyst Roberto Perli has speculated about the hot topic of interest rate hikes stating: ‘While it is true that unemployment is already where the (policy setting Federal Open Markets Committee) thought it would be at the end of this year and inflation is already higher, it is too soon for Yellen to shift fear and start signalling clearly that policy is likely to tighten sooner and/or faster than the market expects. There is still simply too much uncertainty around the state of the economy and the appropriate path of policy for Yellen to do that.’
Meanwhile as the US speculation regarding interest rates is unclear, economists are hypothesising that today’s data will prove valuable in determining the interest rate hike time frame in the UK.
Representative for the London branch of the Royal Bank of Canada, Adam Cole, stated: ‘We are still seeing inflation surprise to the upside. It should work towards lifting UK rate expectations, which is clearly why Sterling is taking it positively. We would see value in expressing that view in the currency at these kind of levels.’
In the rest of the week the Pound will see the release of UK Average Weekly Earnings, Claimant Count Rate, Employment Change, Jobless Claims, and Unemployment Rate data on Wednesday which could all prove to be influential for the rallying Pound.
For now it appears the Pound will continue to remain bullish in the GBP/USD currency pairing as the US Advance Retail Sales data has flopped on Tuesday, only reaching 0.2% in June, far less than the predicted 0.6% or May‘s 0.5%.
Furthermore with Yellen’s speech expected to confirm interest rates are stagnating for the foreseeable future, the US Dollar looks as if it will be subject to a prolonged period of weakness.