Some scope for further GBP strength – MUFG

The Pound weakened last week against the US Dollar but was the next best performing G10 currency. Economists at MUFG Bank analyze GBP outlook.

Key week for UK

After last week’s US inflation data, the key data releases this week will be in the UK. The jobs and wages data will be released on Tuesday followed by the CPI data on Wednesday and the Retail Sales data on Friday.

We suspect the data this week might not show enough evidence of easing upside inflation risks to deter the BoE from hiking in September and in those circumstances following the stronger GDP data, we may well see some scope for further GBP strength. However, with the Dollar also looking on a more solid footing, selling EUR/GBP may prove a better avenue for Pound gains.