Fundamental Comment

Pound holds gains after UK CPI slide to BOE target

Pound holds gains after UK CPI slide to BOE target

The British pound surged for a second straight session on Thursday after U.K. inflation data came in line with expectations and supported the Bank of England to hold interest rates tomorrow.

The GBPUSD pair traded higher at $1.2585, resuming its recover attempts after plummeting to a five-month low of $1.2505 on Tuesday.

The pound pulled the EURGBP pair lower to 0.8896 after touching a peak of 0.8974 the previous session, the highest since mid-January 2019.  

Data released today showed that the U.K. Consumer Price index (CPI) decelerated to 2.0 percent in the year through May, the first retreat in four months, matching forecasts, as opposed to a 2.1 percent increase in April.

The inflation rate is currently at the 2 percent target of the Bank of England, whose monetary policy meeting is scheduled to take place on Thursday, amid expectations the BOE will hold borrowing cost.

The data pointed to the lower prices of transportation services like air transportation, as well as the fall of car prices as the main reasons behind the decline in British inflation last month.

The producer prices index (PPI) in the United Kingdom signaled an increase by 1.8 percent on an annual basis over the past month, a level lower than the previous April at 2.1 percent.

Despite the ongoing Brexit anxiety, the BOE is less likely to follow the same dovish stance of the ECB or even hint to future rate cut plans, like what is predicted from the Federal Reserve later in the day.

In the meantime, the dollar index which measures a greenback of major 6 currencies fell about 0.07 percent at 97.088 dollar ahead of the Federal Reserve's rate decision due later on Wednesday.

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