Last but certainty not least, investors are watching sterling to see how far GBP/USD rises. Having taken out 1.30 and then the year to date high of 1.3050, GBP/USD climbed to an 8 month of 1.3114. The currency pair has performed very well over the past week thanks to the consistent hawkishness of U.K. policymakers. Investors quickly forget about monetary policy committee member Broadbent’s cautious comments and focused purely on McCafferty’s plan to vote for a rate rise in August. Yet this is not surprising considering he was one of the 3 members of the MPC who voted in favor of immediate tightening at their last meeting. So while Brexit talks continue to move slowly, as long as data validates the BoE’s optimism and policymakers continue to talk up the need removing policy accommodation, GBP will rise. That’s a big IF however because like the U.S., U.K. data has not been uniformly positive which makes next week’s retail sales and inflation reports so important. The smaller decline in shop prices and uptick in the BRC retail sales monitor points to stronger numbers that should help rather than hurt the GBP/USD rally.
U.K. inflation figures
The U.K. Office for National Statistics will release data on consumer price inflation for June at 0830GMT (4:30AM ET) on Tuesday. Analysts expect consumer prices to rise 2.9%, the highest level in nearly four years.
The recent surge in inflation, caused largely by the plunge in sterling following last year's Brexit vote, has prompted some Bank of England policymakers to call for higher interest rates in the months ahead.
Besides the inflation report, the ONS will produce data on June retail sales on Thursday, with analysts expecting an increase of 0.4%.
Recent data has pointed to signs that rising inflation is crimping spending by consumers, the main drivers of the economy, just as the country is set to start EU divorce negotiations.
U.K. inflation figures
The U.K. Office for National Statistics will release data on consumer price inflation for June at 0830GMT (4:30AM ET) on Tuesday. Analysts expect consumer prices to rise 2.9%, the highest level in nearly four years.
The recent surge in inflation, caused largely by the plunge in sterling following last year's Brexit vote, has prompted some Bank of England policymakers to call for higher interest rates in the months ahead.
Besides the inflation report, the ONS will produce data on June retail sales on Thursday, with analysts expecting an increase of 0.4%.
Recent data has pointed to signs that rising inflation is crimping spending by consumers, the main drivers of the economy, just as the country is set to start EU divorce negotiations.
Traders were cautious as four days of Brexit negotiations began in Brussels.
The pound jumped almost 2 cents on Friday to hit $1.3113 <GBP=D3, its strongest since last September, after U.S. inflation and retail sales data came in weaker than expected, putting into doubt the prospect of a further rate hike from the Federal Reserve this year.