Comments from Bank of England Governor King helped to inject some new life into the British pound today. According to the central bank head, "Even though inflation is close to the target and pay pressures are muted,we will continue to look ahead and monitor the risks to inflation that we identified in August."
More specifically, King said that business and financial surveys indicate expectations for increased inflationary pressures in the months to come, suggesting that hikes in price could be passed onto consumers. For British pound traders, the chance of a rate cut from the Bank of England has fallen on the back of the central bank’s comments. There will be no more data to clarify the interest rate outlook for the remainder of the week which leaves the GBP/USD’s movements vulnerable to US data.
Written by Kathy Lien, Chief Currency Strategist for DailyFX.com