On May 23, market analyst Eamonn Sheridan wrote that rising UK inflation has cooled the prospects for the Bank of England to cut interest rates in June.
UK inflation figures are as follows:
The UK CPI for April was 2.3%, which is expected to be 2.1%.
The pound rose as UK inflation slowed less than expected.
After the UK CPI report was released, traders reduced the possibility that the Bank of England would cut interest rates.
The chart below shows the UK CPI situation
Dutch International Group (ING) said that although the inflation data “won't change the Bank of England's rules of the game,” the possibility of cutting interest rates in June has decreased.
The opinion of an international Dutch analyst is as follows:
The Bank of England will keep an eye on these numbers and find that the noise is greater than the signal.
However, we believe this did reduce the possibility of interest rate cuts at the June meeting, although another set of data will be available before a decision is made. We certainly wouldn't rule out that possibility.
The Bank of England is clearly divided, and since internal committee members rarely appear in the media, it is frankly impossible to know how to vote.
However, today's data supports our long-standing basic assumption that the first rate cut will take place in August, which provides the Bank of England with additional inflation data to make it more confident about potential trends. For now, let's just keep doing it.
Based on the above information, UK inflation in April was higher than expected, suppressing the Bank of England's interest rate cut expectations in June. This may provide some support to the British pound, and investors need to keep an eye on this.
GBP/USD daily chart
At 10:50 Beijing time on May 23, GBP/USD was reported at 1.2724/25