UK inflation data key for the Pound

Monday’s trading was relatively uneventful with Sterling, Euro and the US Dollar all finishing the day where they started with an absence of any key data. This however is all set to change in the coming days, in particular for the Pound with 3 major data announcements due in the next 3 days.

Inflation figures

Today at 9:30am we will have arguably the most important data release for the Pound this month. In September Sterling gained over 5% off speculation that the BoE will be raising interest rates in the coming months. This is largely down to rising inflation that now sits at 2.9%, with a reading of 3% set to trigger a letter to the Chancellor from Mark Carney. Hiking interest rates is a natural way of curbing rising inflation, and is now being considered even though UK growth is still struggling.

It is considered that a hike in November is already 85% priced into the market, leaving greater room for losses if they don’t hike, than gains if they do. Today the pound will be very sensitive to any difference to the previous 2.9% reading, given the level of speculation currently in the market. Anything lower than this figure could seriously harm Sterling’s value, and vice versa.

At 11am this morning this key release will be followed by the same release but this time for the Euro-zone, with no change currently expected from the previous figure of 1.5%. GBP/EUR should therefore have a very volatile day so keep close contact with your broker should you have a need to buy or sell Euros.

The days ahead

After today’s key data we will swiftly move onto 2 more big releases for the Pound, with the latest Unemployment Rate and average earnings figures at 9:30am tomorrow, followed by UK Retail Sales for September on Thursday. If the gap between inflation and average earnings is seen to be growing, this is another factor that could dampen the positivity of a possible rate hike. It is also worth noting that Retail Sales figures are expected to return to a weaker contraction figure again, after a rare positive month seen in August, perhaps down to the holiday season.

If you do not fancy gambling your Euro requirements over the coming releases, contact your broker today to discuss your options including Limits, Stop Losses and Forward Contracts where you can remove all the risk with just a 10% down payment.