British Pound May Rise as UK CPI Boosts BOE Rate Hike Bets

Talking Points:

  • British Pound may rise if UK CPI tops forecasts, boosts BOE rate hike bets
  • Comments from Fed’s Mester unlikely to inspire shift in FOMC policy view
  • Australian Dollar, Yen cautiously higher in otherwise quiet AsiaPac trade

UK CPI data headlines the economic calendar in European trading hours. The headline inflation rate is expected to tick down to 2.9 percent in January, marking the second consecutive decline. The core reading stripping away volatile food and energy prices is seen rising to 2.6 from 2.5 percent however, hinting that a print in line with expectations may not necessarily counter the BOE’s hawkish posture.

Furthermore, UK price growth has data has tended to surprise on the upside relative to consensus forecasts recently. This hints that analysts may be underestimating inflationary pressure and opens the door for more of the same. Such a result may boost the British Pound as investors reprice baseline policy bets for a sooner interest rate hike. As it stands, a better-than-even chance of an increase is priced in as soon as May.

Later in the day, the spotlight turns to a scheduled speech from

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