BOE Rate Hike Bets Grow on Fresh Inflation Rise
UK Inflation Rises Again
Hawkish BOE expectations remain entrenched today following the latest inflation data out of the UK. Annualised CPI was seen holding at 3% last month on the headline reading while core CPI rose to 3.2% from 3.1% prior. Given that this was the last reading before the Middle East conflict exploded this month the data has lost a little relevance with inflation expectations having jumped higher. However, the slight lift in core (and headline holding well above 2% target) shows that inflation pressures were lingering anyway. As such, expectations for an April BOE hike have risen again with markets now pricing in a more than 70% chance of a hike.
BOE’s Green to Speak
Looking ahead today, focus will be on BOE’s Greene who speaks later and is expected to add further support for the hawks. At last week’s BOE meeting, Greene noted concern over food inflation and rising energy costs. In particular, she worried about the impact of soaring fertiliser costs and how that would impact the food market. With fertiliser costs continuing to rise as the Iran war drags on, Greene is unlikely to be any less concerns. As such the risk today is that we hear a more aggressively hawkish tone from Greene which should keep GBP supported for now.
Technical Views
GBPUSD
The sell off has stalled for now into a test of the 1.3238 level with price since reversing higher to test 1.3446 which ash capped the recovery. These two levels will remain the key range barriers for now with focus on a broader push back up to 1.3774 if we break higher and USD starts to weaken on any further positive Iran news. To the downside, 1.3046 is the next bear target if we break lower.
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