UK inflation data was released today and there were worries of a significant rise, which would have been negative for the pound. The Unilever-Tesco is a prime of example of more expensive imports causing inflation and this problem could become more wide spread throughout commerce as the true impact of the vote to leave the EU filters through.
There was a slight increase, but this was not considered large enough to warrant major problems for Sterling and as result Sterling strengthened during today’s trading session. GBP/USD up to 1.23 and GBP/EUR at 1.11.
Keep an eye on events at the EU summit this Thursday and Friday as Theresa May is due to be grilled about how Brexit will occur. If there is any change in her stance expect the markets to react. Also on Thursday is the European Central Bank monetary policy statement and if Mario Draghi gives any hint to a change in quantitative easing (QE) increments expect volatility on GBP/EUR. There has been rumors that monthly QE increments would decrease, although this would be quite a surprise considering there has been no increase in inflation in the Eurozone.
With Hilary now clear favorite in the race the markets probably factored in a Clinton win. USD sellers should beware on procrastination however as Trump may well have a trump card up his sleeve to try and convert undecided voters. Political uncertainty historically weakens the currency in question so the green back could weaken as the election vote draws closer.
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