GBP stays vigilant on CPI, BoE sets to hike in May – Danske Bank

Analyst at Danske Bank Aila Mihr noted today’s inflation figures in the UK economy will be the biggest risk event for the Sterling.

Key Quotes

“For GBP, focus today will be on the UK CPI print. Market is already pricing in around 70% probability of a rate hike in May, and we would need to see a significant upside surprise in the CPI figures to lift UK interest rates higher today. Hence, in the short term we see risks skewed moderately to the upside”.

“Strategically, we are bearish EUR/GBP and would consider selling EUR/GBP via options on rallies above 0.89. As long as the UK and the global economy continue to do well, the timing and pace of future BoE rate hikes is in essence a function of GBP, energy prices (oil) and UK wage increases. Hence, the prospects of Bank of England rate hikes should keep a lid on EUR/GBP as GBP depreciation could move forward rate hikes”.