FX.co ★ Before sterling, new horizons open up

On Tuesday, the US dollar stopped strengthening locally in the world currency markets. Investors played according to yesterday's news, which was a message that the United States submitted to the UN Security Council. It was a softer proposal to expand sanctions against the DPRK compared to its previous claims. In addition, the North Koreans themselves did not launch, as promised, a new ballistic missile over the weekend, which was regarded positively. Now, all the attention of market players has switched to published data for consumer inflation in the UK.

Published in the morning, the UK consumer price index showed more growth than anticipated. The annual value of the indicator increased by 2.9% against the 2.6% forecast and the increase for the previous month by 2.8%. The monthly indicator value in August added 0.6% against the decrease in July by 0.1% and expectations for growth by 0.5%. In addition to these important figures, the values of producer price indices were also displayed, which also showed an increase. On the wave of these data, the pound soared against the major currencies in the world Forex market.

Positive inflation figures increase the likelihood of the Bank of England deciding to raise interest rates at the September meeting. In the summer, they did not dare do this because the country is still under pressure from the history of Britain's withdrawal from the EU or Brexit. However, this factor has not disappeared yet, leaving the possibility of uncontrolled development of events due to the uncertainty of the Brexit process.Despite this, one thing can be said with a high degree of certainty: the sterling can receive support locally and grow against all major currencies without exceptions before the meeting of the British regulator. In the long term, if the rates are raised in Britain, this will open up the pound's great prospects for growth.

Forecast of the day:

The GBPUSD pair broke through a high of 1.3265 from August 3 this year on the wave of consumer inflation in the UK. Against this background, there is a possibility of continuing its local increase to 1.3435 after consolidating above 1.3265. The decision of the Bank of England to raise interest rates at its September meeting will also affect it.

The EURGBP pair fell to the level of 0.9000. Overcoming this level may cause the continuation of its decline to 0.8885. Technically, the pair has grown strongly since 2015 against the background of Brexit, which was the main negative factor for the pound sterling. However, the weakening of the prospects for the complete elimination of incentive programs from the ECB has already rolled the pair down. And now, if the Bank of England raises interest rates, the price drop will only increase.