PM under more pressure as crucial by-elections are under way

GBP

The British pound eased on Wednesday after record high UK consumer inflation data raised new worries over an economic slowdown, just as the Bank of England looks set for more interest rate hikes in the coming months. The figure matched market expectations and following its release, markets continued to fully price in a 25 basis points rate hike for August. The odds of a 50 bps hike however fell to around 60% from 74%, even though some analysts said such a move was still likely given how high inflation is currently running at.

The BoE has already forecast that inflation will hit 11% by the autumn. Sterling dropped to a one week low against the US dollar after the inflation data release but had recovered by the afternoon.

Traders will also be keeping an eye out for two by-elections today – one in Tiverton and Honiton and another in Wakefield in northern England. Any loss for the Conservative Party could heap pressure back on the Prime Minister and have downward pressure on the pound.

Also amongst the data to be released this morning are UK flash PMI and flash services PMI.

Key announcements

9:30 – GBP – UK Flash manufacturing PMI
9:30 – GBP – UK Flash service PMI
13.30 – USD – US Unemployment claims
14.45 – USD – US manufacturing PMI
14.45 – USD – US flash service PMI
15.00 – USD – Fed Chair Powell testifies