UK August inflation gauge is due for release alter today and is expected to have accelerated further in August. The consumer price index should print at 2.8%y/y, reflection both rising fuel price and a weak pound sterling. The core gauge, which excludes the most volatile components, should also overshoot the BoE target of 2% (median forecast of 2.5%y/y).
Given the fact the BoE made clear it is ready to tolerate higher inflations level as the negative effects of the Brexit are still to come, it is unlikely that the pound sterling appreciates sharply should inflation accelerates more than expected. Similarly, a disappointing reading won’t trigger a sell-off in the pound as it will only bring the gauges closer to the BoE’s target.
On the political side, Theresa May’s Brexit bill made an advance yesterday as lawmakers approved her bill, which is aiming at repealing the 1972 European Communities Act. This is just the beginning of May’s long journey to take Britain out of the EU.
The pound sterling was trading broadly higher on Tuesday morning amid an improving overall risk sentiment. The cable was up 0.20% to 1.3190 and getting closer to the next resistance that lies at 1.3267 (high from August 3rd). The pound rose the most against the Japanese yen as the pair rose 0.225% to 144.42.
By Arnaud Masset