GBP/USD has been boosted by Brexit calm and clearer Fed path. The Bank of England's (BoE) next decision will be influenced by UK inflation. Elevated numbers are key to more sterling gains, Yohay Elam, an Analyst at FXStreet, reports.
UK inflation stands out, as it could determine the BoE's next decision
“Market observers seem resigned to accept that the Brexit topic will linger for a long time – but there is a difference between making the headlines and being a side story. If quiet negotiations replace pompous speeches, sterling could shine. On the other hand, ongoing clashes could pressure the pound.”
“Contrary to the continent, COVID-19 infections refuse to fall in Britain, but the disease's impact on markets is diminished. Any seasonal change in cases or hospitalizations could weigh on the pound.”
“UK inflation is critical for the BoE's upcoming decision. Headline inflation shot to 3.2% YoY in August, above the bank's 1-3% range. If price rises remain elevated, there is room for substantial gains for sterling, as a rate hike in November would seem imminent. A drop below 3% would provide relief to the BoE and could take some of the hot air out of the pound.”
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