Sterling Volatility Expected as UK Inflation Data Looms
The UK is bracing for its August inflation data release on Wednesday at 06:00 GMT, which could impact market expectations for a Bank of England rate hike. The forecasted year-on-year headline CPI increase to 3.1% from 2.9% and core CPI to 2.7% from 2.6% has analysts predicting potential volatility in the sterling.
The upcoming Bank of England decision, expected to remain at 3.75%, is also under scrutiny as three policymakers voted for a rate hike in July. If inflation exceeds expectations, sterling bulls may see an upward move targeting a breakout above 1.3550 resistance level.
Conversely, if inflation comes in softer than expected, the pound faces renewed downward pressure, with a breakdown below 1.3480 highly probable. The Bank of England's vote split tomorrow will also provide insight into the medium-term direction of the pound, with three policymakers voting for a rate hike last time.