With UK inflation figures coming in higher than forecast this morning the GBP/USD cross finally put a stop to its recent decline. Over the past week the pound has lost over 2% against the dollar with exchange rates sliding from 1.5932 to 1.5609 but with CPI figures coming in 0.1% higher than anticipated at 1.3% there was finally some good news for the UK and Sterling.
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As you can see from the graph above today's trading session has been fairly choppy with GBP/USD exchange rates bouncing between $1.5635 and 1.5680. The pound initially found some support following the UK inflation figures but was unable to sustain the gains throughout the afternoon as the U.S produced some positive economic figures to help boost the value of the dollar.
Better than forecast PPI month on month, Core PPI and an improvement to the NHAB housing market index, meant the gains made from by the pound this morning were quickly wiped out.
What could impact rates tomorrow?
It is another big day for the UK and Sterling tomorrow as the Bank of England release the minutes from their MPC meeting two weeks ago. We know the central bank left interest rates at 0.5% but if there is any change to the 7-2 vote we have seen over the last few months we could witness some volatility to the currency markets.
I think its unlikely we will see any change to the number of MPC members voting in favour of rate hike, especially after Mark Carneys comments last week. However, if the vote changes to 8-1 or 9-0 in favour of keeping rates on hold the pound could come under some serious pressure tomorrow morning.
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