Pound Sterling trades cautiously ahead of UK CPI data release
- The Pound Sterling is slightly under pressure against its peers ahead of the UK CPI data for February.
- UK’s core CPI is estimated to have grown steadily 3.1% YoY in February.
- The US Dollar remains firm as Iran dismisses its involvement in the ceasefire talks with the US.
The Pound Sterling (GBP) trades with caution against its major currency peers, and is down 0.2% to near 1.3380 against the US Dollar (USD) during the early European trading session on Wednesday. The British currency is slightly under pressure ahead of the release of the United Kingdom (UK) Consumer Price Index (CPI) data for February at 07:00 GMT.
Pound Sterling Price Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.09% | 0.18% | 0.16% | 0.07% | 0.28% | 0.36% | 0.19% | |
| EUR | -0.09% | 0.10% | 0.07% | -0.03% | 0.19% | 0.26% | 0.08% | |
| GBP | -0.18% | -0.10% | -0.02% | -0.11% | 0.10% | 0.18% | -0.00% | |
| JPY | -0.16% | -0.07% | 0.02% | -0.08% | 0.13% | 0.20% | 0.02% | |
| CAD | -0.07% | 0.03% | 0.11% | 0.08% | 0.23% | 0.30% | 0.11% | |
| AUD | -0.28% | -0.19% | -0.10% | -0.13% | -0.23% | 0.08% | -0.11% | |
| NZD | -0.36% | -0.26% | -0.18% | -0.20% | -0.30% | -0.08% | -0.19% | |
| CHF | -0.19% | -0.08% | 0.00% | -0.02% | -0.11% | 0.11% | 0.19% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
The Office for National Statistics (ONS) is expected to show that the core inflation – which strips off volatile items such as food, energy, alcohol, and tobacco – remained steady at 3.1% Year-on-Year (YoY). On a monthly basis, the headline CPI is estimated to have grown 0.4% after a 0.5% decline in January.
Usually, the inflation data has a significant impact on market expectations for the Bank of England’s (BoE) monetary policy outlook; however, this time, it is expected to remain limited as figures are immune to the recent surge in energy prices, which is driven by conflicts in the Middle East.
Meanwhile, broader market sentiment remains risk-on as the United States (US) has called for a month-long ceasefire with Iran, along with a 15-point settlement proposal. S&P 500 futures have risen almost 0.8% in the Asian session, reflecting a strong demand for riskier assets.
Despite improved market sentiment, the US Dollar trades higher as Iran keeps denying its involvement in negotiations with the US regarding the ceasefire. During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.15% higher to near 99.35.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
