GBP gains momentum as higher-than-expected UK inflation data cements expectations for a November BoE rate hike, though analysts warn that current market pricing for further tightening may be overextended.
The British Pound has gained momentum against the Dollar following a higher-than-expected UK September CPI print. According to Elias Haddad of Brown Brothers Harriman, this data reinforces the expectation of a 25 basis point rate hike by the Bank of England on November 5, bringing the rate to 4.00%.
A 25 basis point hike to 4.00% is expected on November 5.
The EUR/GBP pair has turned bearish as the British Pound strengthens against the Euro in response to the UK's inflationary data. While the CPI surprise provides immediate support for the Pound, the broader outlook remains tempered by concerns that the swaps curve is overestimating the extent of future BoE tightening.
The pair is bearish because the UK's upside CPI surprise has strengthened the Pound relative to the Euro.
The British Pound climbed against the Dollar and Euro after UK September CPI data exceeded forecasts, reinforcing expectations for a 25 basis point Bank of England rate hike. While analysts view the November 5 increase to 4.00% as largely assured, market pricing for further aggressive tightening may create future headwinds for the currency.
The Pound rallied because the September inflation data exceeded expectations, increasing the likelihood of a 25 basis point interest rate hike by the Bank of England.
Market participants largely anticipate a 25 basis point hike to 4.00%, though some analysts believe the market is currently pricing in too much additional tightening beyond that move.