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GBP : Rally On The Last Leg?

(Wed, 20 May 2020). The CPI measure of UK inflation fell in April to its lowest level since August 2016. Now traders will be focusing on testimony this afternoon by Bank of England Governor Andrew Bailey and on Thursday’s purchasing managers’ indexes. The rally in risk assets is faltering too as hopes of a Covid-19 vaccine are offset by concerns that the global economic recovery from the virus pandemic could be slow and patchy.

 

GBP/USD RALLY CHECKED
The rally this week in GBP/USD is faltering in early European business Wednesday, suggesting that further gains could be hard to come by near-term. The recovery in global markets generally on hopes of a Covid-19 vaccine are currently being offset by concerns that a global economic recovery is still some way away, and that is helping GBP along with other assets seen as risky.

 

UK INFLATION FALLS
Data released Wednesday showed that the CPI measure of UK inflation fell to 0.8% year/year in April – its lowest level since August 2016 and down from March’s 1.5%. The number was broadly in line with market expectations so had little impact.

However, inflation could be a point of discussion later Wednesday at an inquiry by the UK Parliament’s Treasury Committee into the Bank of England’s monetary policy. Among those giving testimony will be BoE Governor Andrew Bailey, Deputy Governor Ben Broadbent and fellow policymakers Jon Cunliffe, Elisabeth Stheeman and Jonathan Haskel.

As for Thursday, Sterling traders’ attention will likely focus on purchasing managers’ indexes for May. The “flash” data are expected to show a recovery from April but with the manufacturing, services and composite PMIs all staying well below the 50 level that separates expansion from contraction.

 

 

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