Sterling higher ahead of this week’s inflation data and prime minister’s Brexit tour
Earlier German producer prices showed their biggest year on year rise since December 2011.
They climbed by 3.1% but this was slightly less than the expected rise of 3.2%. The month on month figure was 0.2%, again a little lower than the forecast 0.3%.
European markets are set for a mixed open:
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Despite the continuing uncertainty about the outcome of Brexit negotiations, the pound is holding firm in early trading, as prime minister Theresa May begins her nationwide tour to “unite the country”.
The Bank of England hawks could send the pound above the 100-day moving average (1.2408) against the US dollar. The UK’s inflation data is due on Tuesday and could restate the rising inflationary pressures in the UK. The consensus for the headline inflation is 2.1% year-on-year versus 1.8% printed a month earlier. The core inflation may have climbed to 1.7% year-on-year from 1.6% a month earlier. After the MPC delivered an unexpectedly hawkish stance at last week’s monetary policy meeting, a solid inflation read could easily boost the BoE hawks, encourage a further appreciation in the pound across the board and dent the appetite in the FTSE.
Sterling is still holding tight, thanks to the Fed neutral hike and BoE’s Kristin Forbes who voted for a rate hike. With inflation on the rise some MPC members believe that a rate hike would be needed sooner than later, but how many MPC members will join Ms. Forbes remains uncertain. Brexit headlines will become the major force moving the pound the days ahead, and the harsher stance EU takes the more pressure might be felt.