Andrew Bailey dismissed sub-zero interest rates; markets await US inflation data.
The pound sterling hit a 7-week peak against its main rival, the euro, during London trading on Wednesday. Analysts say that was largely based on the news that Andrew Bailey, Governor of the Bank of England, dismissed out of hand the prospect of below zero interest rates. Mr. Bailey said that the rate environment would likely weigh on the banking system and further pressure the already flailing British economy. Market indicators suggest that Bailey's words carried some weight, as expectations of even a discussion of negative rates have been pushed back to June, a month later than previously thought.
As of 11:25 am in London, the EUR/GBP was trading lower at 0.8915 pence, a loss of 0.1937%; the pair has ranged from a trough of 0.88949 pence and a high of 0.89430 pence. The GBP/USD was trading at $1.3660, down 0.0066%, and off the session peak of $1.37012, while the low was recorded at $1.36546.
US Inflation Data in Focus
Market attention will focus on inflation data from the US which will be coming out later today. Analysts are predicting that CPI or personal inflation will have risen in December to 0.4% from 0.2% on a month-on-month basis. Core CPI, which removes volatile food and fuel components, is expected to show a decline to 0.1% from 0.2% on a month-on-month basis; annualized CPI for December is expected to be flat at 1.6%. Maintaining price stability is one of the Federal Reserve's dual mandates and personal inflation is the key metric by which it is measured. The greenback has strengthened in recent days, and the EUR/USD pair is currently lower at $1.2169, down 0.2868%, while the USD/JPY is higher at 103.9720 yen, a gain of 0.20%.