GBP remains solid - BTMU

FXStreet (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ, highlights the strong outlook for the sterling.

Key Quotes

"The pound continues to firm supported by the robust pace of economic recovery in the UK. The release yesterday of the stronger than expected UK inflation report for April has also provided further support for the pound in the near-term by encouraging BoE rate hike expectations although the support will likely prove only temporary."

"The late timing of Easter was likely mainly responsible for the upward surprise as the annual rate of core inflation accelerated to 2.0% in April from 1.6% in March. The release of the more subdued than expected producer price report for April will also help to dampen any concern that inflation is beginning to accelerate."


"The strengthening pound is likely helping to dampen producer input prices which declined by an annual rate of 5.5% in April while producer output prices remain subdued as well at an annual rate of 0.6%. The BoE expects headline inflation to remain just below their 2.0% target in the coming years allowing them scope to maintain loose monetary policy. The release of the latest MPC minutes today are unlikely to be market moving mainly echoing the policy signal sent in the Quarterly Inflation Report last week which revealed that the BoE’s outlook for economic growth has been revised modestly higher and unemployment rate projections lowered although the inflation projections remained broadly unchanged suggesting only slightly less spare capacity."