The British pound has moved higher on Wednesday. In the European session, GBP/USD is trading at 1.1934, up 0.56%. The pound roared on Tuesday, gaining close to 1% and punching past the 1.20 line for the first time in three months.
It has been a busy time for sterling, which has been marked by sharp swings that would make an exotic currency blush. The pound’s volatility has been especially pronounced in the month of November. The US dollar has hit a rocky patch and the pound has taken full advantage, climbing 3.5% this month.
It’s up, up, up for UK inflation
UK inflation continues to rise and hit a staggering 11.1% in October, a 41-year high. The upward trend continued despite the government introducing an energy price guarantee. Inflation jumped from 10.1% in September and ahead of the consensus of 10.7%. Core CPI remained unchanged at 6.5%, but was higher than the forecast of 6.4%. The Bank of England hasn’t been able to stem rising inflation despite tightening policy but will be hoping that its jumbo 0.75% hike earlier in November will take a bite out of the next inflation report.
The UK economy is facing a double-whammy of high inflation and a recession, and all eyes will be on Finance Minister Jeremy Hunt, who will announce the government budget on Thursday. Hunt will aim to restore the government’s credibility and stability, after the recent political soap opera which resulted in three different prime ministers in a matter of months and significant financial instability.
The UK employment report on Tuesday was lukewarm, with unemployment ticking higher to 3.5%, up from 3.4%. The Bank of England will be concerned about the increase in wage growth, which will create even more inflation. Wages excluding bonuses rose to 5.7%, up from 5.5% and ahead of the consensus of 5.6%. The BoE will be under pressure to continue hiking aggressively, even though this will hurt the struggling UK economy.
- GBP/USD has pushed above resistance at 1.1878. The next resistance is 1.2030
- 1.1767 and 1.1660 are providing support
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