GBP

A lack of risk appetite and no real domestic developments have forced the pound to hold within a tight range this week so far.

Prime Minister Boris Johnson has seemingly managed to stabilise his position for now, pending the police inquiry into the Downing Street parties. With multiple Conservative party donors and a number of MP’s turning against the Prime Minister, his position is still very much under threat.

After the recent Bank of England rate hike, currency markets are now looking towards fresh data and comments from monetary policy members. BoE Governor, Andrew Bailey, is due to speak today. Any guidance or hint on future policy will have an impact on the direction of the pound.

USD

With no important economic data due out today for the UK, much of the focus will be placed on the US inflation report.

While the US dollar traded largely unchanged for the majority of the week, today’s data release should provide guidance about the pace of the Federal Reserve’s policy tightening and a sense of end of the week fluctuation for the USD.

The Fed is expected to raise interest rates by 25 basis points in March to combat rising prices. However the main question for currency markets will be whether the CPI number will be enough to push the Fed towards a 50 bps hike. Cleveland Fed President Loretta Mester recently stated that the time is now right for the central bank to begin raising interest rates, but she doesn’t think there’s any compelling case to start with a 50 bps rate increase. Analysts are currently predicting a monthly rise in inflation of 0.5%, whilst the year on year figure is expected to reach an almost forty year high of 7.3%.

Key announcements

13.30 – USD – CPI data release
17.00 – GBP – Bank of England Governor Bailey speaks