UK inflation in line with forecasts - GBP moving higher

Published date: 19/06/2019

GBP has been moving higher this morning, and this could be down to a number of factors.  More immediately, the inflation figures show CPI is in line with expectations at 2.0%, with the core rate a little better than forecast at 1.7%.  Given the BoE have been sounding a little hawkish recently, the prospects of a rate hike could be a factor in near term outperformance, despite ongoing Brexit fears with pro-Brexit Boris Johnson.  The BoE meet tomorrow and compared to a dovish ECB - as per Draghi's comments yesterday, there is some policy divergence here which could push EUR/GBP lower in the near term. 

Boris Johnson has also been a little softer in his Brexit rhetoric, leaving the door open for a minor extension to the exit date if a deal is in sight.  If he succeeds in getting the PM spot, then he will look to renegotiate terms, as he clearly favours leaving the EU with a deal unlike some of his more hard-line colleagues who are still in favour of leaving on WTO terms.  

There is also the not-so-small matter of the FOMC meeting tonight, where we could see a broad-based USD correction which would also push Cable higher.  In yesterday's price action we saw buyers coming in firmly ahead of 1.2500, and this may be a sign that the negative Brexit sentiment may have run its course for now - or at least until we get fresh news.  GBP seems to have been a default sell on auto-pilot, but stronger support levels have finally emerged, so it could be sideways from here until the next major driver impacts the pair. 

EUR/GBP support seen at 0.8900 for now, with a move below here bringing the mid 0.8800's into focus.  Cable resistance seen either side of 1.2600, but a move above 1.2660 would be a positive sign, though this seems unlikely ahead of the FOMC announcement later this evening.


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