The UK’s latest inflation figures and labour market report are due out on Wednesday and Thursday respectively, with the pound (GBP) poised to tumble if these releases fuel Bank of England (BoE) interest rate cut bets.
At the time of writing, the pound is on the back foot, having suffered a bruising July so far. GBP/USD touched a three-week low last night, while GBP/EUR is trading at its worst levels since late 2023.
What are the latest releases expected to show?
The UK’s consumer price index is expected to show that headline inflation held steady at 3.4% in June while core inflation also remained unchanged at 3.5%.
Meanwhile, the labour market overview is forecast to reveal a further moderation in wage growth in the three months to May and the smallest increase in employment since November 2024.
How could this impact GBP?
Wednesday’s CPI could lend Sterling support, if inflation holds steady well above the BoE’s 2% target. However, with this being broadly in line with the bank’s inflation forecasts, any upside may be minimal.
Investors are likely to pay closer attention to the jobs data. BoE Governor Andrew Bailey said earlier this week that the bank could cut rates further if the UK labour market slows. Softer wages and slowing employment growth could therefore undermine the pound.
In the meantime, the spotlight falls on the US CPI, out this afternoon. An expected acceleration in inflation could dampen Federal Reserve rate cut bets and boost the US dollar.
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