Pound under pressure from lower inflation. Will the BoE accelerate the easing of monetary policy?

The beginning of Wednesday's session on financial markets is not favorable for the British pound. Lower data CPI from Great Britain connected to higher inflation rates in the USA the GBP/USD pair is moving down.

Monetary policy comes to the fore of market struggles and it is it that determines the current market sentiment. In this matter, things may also be interesting in Poland, thanks to the GDP reading for the fourth quarter scheduled for today.

Monetary policy of the Bank of England

In terms of data, the largest decline in Great Britain is recorded in the MoM inflation dynamics, which is significantly below expectations (-0,6% m/m; forecast was -0,3% m/m; previously it was 0,4% m/m ). In YoY terms, the data also are lower than expected, but this deviation is not large. The data may encourage the BoE to loosen its monetary policy more quickly. This, at the moment, also seems to be confirmed by money market data, which fully estimate three rate cuts of 3 basis points. BoE this year (before the report from 08:00, the market estimated these reductions to be less than 2,5).

Moreover, it is a factor that puts pressure on the couple GBP / USD There are yesterday's higher inflation data from the USA. Immediately after the publication, expectations related to the first Fed cuts dropped to less than 100 bp. in 2024 compared to 125 bps. before the report. Therefore, the first one the interest rate cut was postponed from June to July, and a potential May reduction is practically excluded.

We will learn GDP data in Poland

At the macro level and potential NBP decisions, GDP data for the fourth quarter may be crucial in Poland today. Analysts expect that on a quarterly basis our country's gross domestic product will shrink by 0,3%, and this may be a key factor to which the Monetary Policy Council will respond in the future.

Antipodean currencies are performing particularly well on the broad market today. The British pound is experiencing greater declines. The Polish zloty is recording significant declines this morning. Currently, we will pay PLN 4,0730 for a dollar, PLN 4,3492 for a euro, PLN 4,5791 for a franc, and PLN 5,0998 for a pound.

Source: Mateusz Czyżkowski, XTB