Published: 09/08/2022 By ECAPPolitical concerns and recessionary fears continue to weigh on the pound as we start the week with GBPUSD holding within reach of the 1.21 figure. There has been a lot of discussions around the new prime minister (truss/sunak) whom both have hinted at some form of fiscal stimulus by the way of tax cuts. Tax cuts are aimed at encouraging economic growth and it may also add to the inflationary concerns, resulting in a further set of rate hikes by the Bank of England. With very little on the docket today in the form of data, eyes are fully focused on Fridays UK GDP figures where the preliminary figure is expected to show a -0.2% figure, if we were to see this edge into growth, or even to be flat, one would expect to see a sterling rally.
The dollar seems to be holding steady against both the EUR and GBP with the market eagerly expecting tomorrows US inflationary data. The data for core inflation is expecting a figure of 0.5% and the headline inflation to post 0.2% from the previous months reading of 1.3%. Last month we had a surprise to the upside with US inflation, which somewhat led to their 75 basis point hike, should we see another surprise to the upside combined with the lack of forward guidance from the FED the dollar could start to lose ground against its counterparts.