ANZ highlights the upcoming week as a critical period for assessing the narrative of GBP outperformance, with a series of significant data releases poised to challenge or bolster this view. The CPI data stands out as the primary focus, potentially reinforcing support for the GBP in the forthcoming months. Additionally, recent PMIs indicate a robust UK economic landscape, hinting at renewed price pressures, particularly within the manufacturing sector, which could suggest an uptick in future UK inflation rates.
Inflation and PMI Data: Upcoming CPI data and PMI figures are expected to play pivotal roles in evaluating the GBP's trajectory. The resurgence in manufacturing prices, particularly in the wake of recent global events, could signal a forthcoming inflationary push.
Services Sector: While the correlation between services PMI and CPI was less pronounced in 2023, recent PMIs suggest a halt in the easing of services prices, potentially influencing future inflation dynamics.
BoE Policy and Economic Momentum: The Bank of England's (BoE) recent meeting underscored a strategy of balancing inflationary pressures against growth, aiming to sustain positive economic momentum as indicated by PMI data.
Other Economic Indicators: While CPI data is anticipated to be a significant driver for the GBP, other indicators such as wages and retail sales may offer less support due to their recent softness.
ANZ posits that the upcoming CPI release will be a decisive factor for the GBP's direction in the immediate future, with other economic indicators playing supporting roles in shaping market perceptions. The bank expresses a favorable outlook towards GBP against the CHF and EUR, based on the expectation that inflation data, in particular, will underpin GBP's strength. This week's data releases, therefore, present an opportune moment for traders to gauge the sustainability of GBP's outperformance narrative.