Excel Currencies Blog

The Bank's Chief Economist Huw Pill, suggested in his speech at the Institute of Chartered Accountants event that the Bank could cut rates, before inflation had fallen back to the 2% inflation target. Considered a 'swing' voter, meaning he is not steadfast in seeing concrete evidence that inflation is comfortably under control, this is interesting news. 

It makes next weeks' UK inflation report a very real risk event for GBP. Puw said "It's not unreasonable to believe that through the summer we will begin to see enough confidence in the decline in persistence, that the bank rate will come under consideration. It's important to recognise we can cut the bank rate, while still leaving some restriction in the system".

These comments came after the UK posted stronger than expected wage data, against the odds. Wages have been sticky for 4 consecutive months now, which will be a concern for the BoE, even if overall inflation is dropping. Next week is therefore a pivotal week for Sterling and it means June is expected to be a very volatile month. 

Elsewhere, the Euro-Zone has posted positive GDP numbers as expected and the US released higher than anticipated PPI inflation (domestic price pressure). The latter causes more issues for the Fed in determining what to do with interest rates as PPI is a strong trend for overall inflation.