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Aug 16 - 09:55 AM

MUFG: GBP Positioning Strategy After UK's Inflation Data Surprises

By eFXdata  —  Aug 16 - 08:30 AM

Following the unexpected surge in the UK's July CPI data as released by the ONS, MUFG offers insights on how to strategize positions in the GBP.

Key Points:

  1. July CPI Data Surprise:

    • The ONS revealed an unexpected uptick in July's CPI data, coming after the strong wage data from the previous day. The silver lining is that the magnitude of this surprise is notably lesser than what was seen with the wage data.
  2. Bank of England's Potential Response:

    • This data will naturally heighten the expectations of the Bank of England (BoE) opting for a 50bps hike rather than the anticipated 25bps in September. However, MUFG is skeptical about a significant shift in pricing at this stage.
  3. Positioning Strategy:

    • MUFG suggests that in light of the present inflation data and its potential repercussions, it might be prudent to lean towards long GBP views against the euro. However, due to the potential upside for the US dollar, significant gains for the GBP following this CPI release are deemed unlikely.


The unexpected rise in the UK's July CPI data has given market participants much to ponder. While this increases the chances of a more aggressive rate hike by the BoE in September, MUFG believes significant shifts in pricing are unlikely for now. For those considering GBP positions, a long stance against the euro might be the safer bet, especially given the potential for the dollar to strengthen in the near term.

MUFG Research/Market Commentary


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