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GBP/USD extends gains as oil outlook keeps UK inflation in focus

RaboResearch says the Bank of England’s central oil-price forecast is for a drop toward $71, while a $100 oil scenario would push UK inflation to 4% or higher.

Reported · Written up by our desk · Major Pairs

RaboResearch highlighted oil as a key input for UK monetary policy, noting that the Bank of England’s central forecast assumes oil prices fall from $76 to around $71, with inflation peaking near 3.2%. It also said severe upside risk remains, because Brent is already trading above $90 and an oil price of $100 would imply UK inflation of 4% or higher.

In the FX market, GBP/USD advanced beyond 1.3450 following the Bank of England’s decision to keep the benchmark rate unchanged at 3.75%. The Bank’s Monetary Policy Committee voted 6 to 3 to hold rates, with the three dissenters favoring a hike.

The move higher for the pair was reinforced by a weaker US dollar and a softer US growth read. FXStreet reports that US Q2 GDP came in below expectations, with the economy growing at an annual rate of 1.5% versus the market forecast of 2.1%.

FXStreet also cited broader dollar pressure, pointing to doubts about a September rate hike after the Federal Reserve vote and adding that a suspected JPY intervention weighed on the greenback. EUR/USD was also described as trading around 1.1530, reaching fresh six-week highs, during the same session.

Latest closeBrent $100.98 ▼2.0%|EUR/USD 1.138 ▼0.6%|GBP/USD 1.322 ▼0.9%

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