Talking Points:
British Pound Looks to UK CPI Data to Direct BOE Interest Rate Hike Bets
Australian Dollar Down as June RBA Minutes Reveal Call for Depreciation
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May’s UK CPI figures headline the economic calendar in European trading hours. The core year-on-year inflation rate is expected to rise to 1 percent, rebounding from the 14-year low recorded in the prior month and snapping a three-month deceleration streak. Leading surveys appear to support the case for an improvement.
UK news-flow has tended to disappoint relative to consensus forecasts over recent months however, warning of the plausible probability of a downside surprise. Such an outcome may underscore the disparity between the BOE’s apparent nod toward a mid-2016 rate hike telegraphed in the central bank’s latest Inflation Report and the markets’ priced-in bets for tightening by the first quarter. The British Pound may face selling pressure in such a scenario, although follow-through may be limited as traders wait for the release of minutes from June’s MPC meeting before showing directional commitment.
The Australian Dollar declined after the publication of minutes from June’s RBA meeting. Governor Glenn Stevens and company reiterated that the stance of monetary policy should be accommodative, adding that further Aussie depreciation is both likely and necessary. Markets price in no further interest rate cuts over the coming 12 months however, hinting that downside follow-through may prove lacking in the near term.
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— Written by Ilya Spivak, Currency Strategist for DailyFX.com
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British Pound Looks to UK CPI Data to Drive BOE Rate Hike Bets
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