Cable

Chancellor Rishi Sunak gives the Spring Statement as inflation continues to rise and is expected o hit 8% in April. Will he bring some relief to households?

The EU granted the UK’s flextension until 31st October, four-month longer than PM May requested. Yet whilst today’s ‘meh’ reaction points towards Brexit fatigue, the coiling nature of GBP suggests volatility could be brewing.

Since last night’s FOMC meeting, we have had two other major central bank rate decisions and some key data as well. But there is one last major central bank policy decision still to come in less than an hour’s time: The Bank of England.

After a sharp two week sell-off, the GBP/USD has reached and reacted from a key technical support area today.

Despite news that the UK inflation climbed its highest rate since March 2012, the GBP/USD initially dropped to its lowest level since 28th November, underscoring investors’ scepticism over last week’s Brexit deal, before bouncing back.

Could we see a more hawkish Bank of England on Thursday? Surely the Monetary Policy Committee cannot justify keeping interest rates at the current record low level of 0.25% for too long after CPI inflation accelerated to 2.9% y/y in August, driven by a record rise in clothing and footwear.

Equity markets rallied back on Monday and safe-haven demand took a downturn as Hurricane Irma abated and North Korea refrained from conducting more missile tests (for the time being). The US dollar found a bit of footing as it rebounded after having dropped to a multi-year low against a basket of other major currencies late last week. Meanwhile, the British pound managed to stay well-supported in the run-up to a week featuring major economic data releases and a key central bank decision from the UK.

The Bank of England has left interest rates unchanged with only two of its MPC members voting in favour of a hike this month.

If the dollar were to head further lower, then the GBP/USD could be the next pair to rally given that all the other dollar crosses have had their fair share of the fun already, except sterling. Supporting this view, data from the UK hasn’t been bad this week...

In a historic moment today, Theresa May has delivered the UK exit letter to her European Union colleagues, officially starting the Brexit process today. With so much uncertainty hanging over the UK economy, it is logical to think that the pound could remain under pressure...

The GBP/USD has hit a fresh post-FOMC high this afternoon. Like the Bank of Japan and Swiss National Bank, the Bank of England decided to keep its monetary policy unchanged. BUT it wasn't a unanimous decision as Kristin Forbes voted for a 25 basis point rise amid concerns over inflation. This caused the pound to jump across the board.

Something odd is happening this morning. Both the pound and the FTSE are higher. The two assets have had a strong negative correlation for several months. The relationship made sense: a stronger pound is not meant to be positive for UK stocks as it could hurt exports and thus profitability. So the theory goes. In practice, it is not as simple as that...