Money News Overview Tuesday 22nd May: GBP/USD hits two-month high & GBP/EUR reaches highest level since March

Sterling has been on the front foot in early trading this morning, following the release of UK CPI inflation data for April. 

Today’s level is the closest it has been to the Bank of England’s target of 2% in three years.

However, the Bank has signalled that interest rates, which have been hiked in recent years to restrain inflation, may be reduced this summer. Rates are currently at 5.25% (the highest in 16 years).

Yesterday, several central bank officials’ remarks were once again the focus of attention. ECB President Christine Lagarde reiterated that a rate drop in June was inevitable. In the United States, Fed Governor Waller stated that the next interest rate policy decision is unlikely to be a rise, but additional evidence that inflation is falling steadily to 2% is required before the Fed may decrease rates. Fed officials Bostic and Mester also stated that more information will be required before the Bank cuts rates.

Looking ahead, the overall calendar remains quiet for the rest of today. On the monetary policy front, the release of the most recent Fed FOMC meeting minutes will get some attention. Remarks from central bank officials will also be scrutinised.

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