19/04/2018 - Pound Drops As Inflation Cools

GBP

Sterling briefly hit a four-day low on Wednesday after British inflation cooled unexpectedly, raising concerns that the Bank of England might not implement further increases to interest rates after next month’s expected hike. Wednesday’s official data showed annual consumer price inflation fell to 2.5 percent in March, down from 2.7 percent in February and below economists’ expectations. Investors however trimmed some short bets as they judged the fall was too excessive against a broader economic backdrop still supportive of a quarter-point increase to rates next month.

With a May increase already firmly priced into market expectations due to a recent string of strong data and positive Brexit news has prompted suggestions that the central bank will follow up with another increase in November. Growing bets of further rate increases have boosted sterling in recent weeks, taking it to the top of the league tables as the best-performing G10 currency with a 5 percent gain so far this year. 

USD

The U.S. dollar held on to gains on Wednesday after rising from a three-week low as fading concerns about a trade war fed broader appetite for risk-taking among investors.

U.S. markets were buoyed by strong corporate earnings and that helped European equities on Wednesday as investors focused on economic data and put to one side worries about a global trade war. 

Key Announcements

09.30 – GBP – Retail Sales MoM; Forecast at -0.5% against a previous of 0.8%