GBP: Focus on the UK CPI – Danske Bank

Analyst, Aila Mihr at Danske Bank, suggests that for GBP, focus today will be on the UK CPI print as market is already pricing in around 70% probability of a rate hike in May, and they would need to see a significant upside surprise in the CPI figures to lift UK interest rates higher today.

Key Quotes

“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.”