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UBS & Сommerzbank: comments on UK data

GBP/USD remains resilient, holding above 1.7100. Strong inflation figures released on Tuesday render fundamental support to the British currency. CPI approached the BoE 2% target, coming out at 1.9%. However, the pound’s rally was contained by a lack of wage growth that today’s labor market data revealed.

Analysts at UBS and Commerzbank view the high inflation as a guarantee of sooner BoE rate hikes.

According to UBS strategists, the recovery of consumer and house prices is much quicker than many expected and should eventually lead to central bank action, even though Mark Carney moderated such expectations on Tuesday.

Commerzbank analysts agree: “With unemployment falling, business surveys printing at robust levels and now inflation close to the BoE's target level, any sign of wage growth will effectively put the icing on the cake as far as markets are concerned”. In their view, the second half of the year 2014 will be “all about the pound dealing with higher rate expectations”.

Chart. H4 GBP/USD

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