TRENDING:

XAU/USD

EUR/USD

UK inflation quick analysis: BOE rate hike in August possible, assuming no cliff-edge Brexit

UK inflation slightly beat expectations with 1.9% YoY.
The BOE has yet another reason to raise rates.
Brexit is in the way of everything, so a decision will have to wait.

Yohay Elam FXStreet

The deceleration in inflation may have ended, or at least paused. The UK reported a slight acceleration from 1.8% to 1.9% in February after months of declines. Energy prices were responsible for the moderation and have contributed to the bump.

The data join the upbeat jobs report released on Tuesday, that showed a healthy growth rate of 3.4% in wages and a drop in the unemployment rate to 3.9%.

Both publications add to the case for a rate hike in the UK. A rise in interest rates will, in turn, push the pound higher. However, the reaction on GBP/USD was muted. The Bank of England convenes on Thursday, and they will likely sit on their hands once again.

Why? The answer should be evident to anyone following the news: Brexit. The uncertainty around Britain's exit from the European Union paralyzes political life and economic policymaking in Britain.

The latest from the Brexit front is that the UK will likely ask for a short Brexit extension, postponing the precipice by only several months. However, as long as Brexit is orderly, things will return to normal. Assuming a no-deal Brexit is avoided, the recent data suggest the BOE may raise rates as early as August.

The next Quarterly Inflation Report is due in May, and that will be too early for a hike. However, by August's QIR, more clarity is likely. If there is no severe disappointment in the data, the BOE is on track to hike, and GBP/USD will have more reasons to rise.

More: GBP/USD Forecast: Traders go short as May goes for a short Brexit extension

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

AUD/USD leans on a China prop that's quietly buckling

The Australian Dollar spent Monday trying to talk itself into a recovery, and the tape was not buying it. AUD/USD has ridden a China-and-commodities narrative for months, one that conveniently glossed over how shaky both legs of that trade have become, and Friday's Nonfarm Payrolls print finally forced a reckoning. US employers added 172K jobs against a consensus near 85K, with roughly 93K of upward revisions to prior months and the unemployment rate steady at 4.3%.

USD/JPY: Japanese Yen ignores every reason it has to strengthen

There is a strange disconnect running through the Japanese Yen right now, and USD/JPY parked just above 160.00 captures it perfectly. By any domestic reading the Yen should be firming: first-quarter Gross Domestic Product beat expectations over the weekend at 0.5% on the quarter, the Bank of Japan is widely expected to raise rates at its meeting on June 18, and authorities have spent the past week jawboning a currency they clearly want stronger.

Gold faces initial resistance near $4,350

Gold manages to reclaim the $4,300 mark per troy ounce and above on Monday. The yellow metal’s small uptick comes on the back of modest losses in the US Dollar, while traders continue to follow geopolitical events in the Middle East and the likelihood of a tighter-for-longer Fed.

Strategy resumes BTC accumulation with 1,550 Bitcoin purchase, adjusts STRC dividend schedule

Bitcoin treasury firm Strategy bought 1,550 BTC last week for roughly $101.3 million, according to a Form 8-K filing on Monday. The purchase, made at an average price of $65,332 per Bitcoin, was funded through proceeds from the company's at-the-market equity offering program.

$1.75 trillion: Is SpaceX the most popular IPO in history, or the most engineered?

On June 12, the largest initial public offering (IPO) in history is set to hit the tape, and almost nobody is asking whether the price is right, because almost everybody already wants in.

The US economy defies the rules: 100 days into the Oil shock and the recession signal is still missing

More than three months after the start of the Iran war and the resulting disruption to global energy markets, the US economy continues to display remarkable resilience. The conflict has triggered a sharp rise in Oil prices, reignited inflationary pressures and fueled widespread concerns about a potential economic slowdown.

UK inflation quick analysis: BOE rate hike in August possible, assuming no cliff-edge Brexit

Editor's Picks