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The British pound has a very busy week as traders digest employment data, Tuesday, inflation on Wednesday and retail sales on Friday.
Economists expect 3.9% UK inflation for October, strengthening rate hike by BoE’s December meeting to suggest three scenarios:
1. Within expectations: A reading between 3.6% to 4.4% meets estimates. In this scenario, GBP/USD could suffer as traders take profits on gains already made. The move may be limited, as it would still represent a substantial increase in inflation.
2. Above expectations: Soaring inflation could be considered 4.5% for Wednesday’s release means that the BOE’s forecast of 5% will materialize. The BOE could follow December’s potential hike with another one sooner, and the GBP/USD could extend its gain recovering recent losses.
3. Below expectations: Inflation rises but up to 3.5% YoY, it would be a shy increase that could make rate hike in December not an option for BoE. Consequently, the GBP/USD would fall in a scenario like that.
