InstaForex

September 27, 2021

Pound Starts ‘Warm Up Engine’ In European Session

 The pound found support to rise higher in the European session, as most other major currencies reduced gains slightly following the resurgence of the greenback dollar.


The UK is currently facing pressure from a surge in high gas prices amid a supply shortage ahead of the winter. The UK Petrol Retailers Association says 50-90% of petrol stations in some areas are out of supply, and the crisis is seen to put pressure on the pound.


This indirectly causes the market to expect higher inflation to occur in the UK. If inflation continues to rise, this will likely prompt the Bank of England (BOE), to start raising interest rates faster than expected.


Previously, the central bank forecast inflation to rise 4% this year, but current figures in August showed UK inflation had risen to 3.2%. The surge in gas prices is likely to push inflation higher in the coming months.



Investors are now looking forward to BOE Governor Andrew Bailey's speech early Tuesday morning (2.00 am Malaysian time) at the annual forum held by the European Central Bank (ECB).


Meanwhile, the greenback rebounded at the opening of the European session, trading higher against most major currencies at around 93.40.


In fact, the US dollar was seen still strengthening following last week’s hawkish FOMC decision, but the gains recorded were limited due to risk-on market sentiment supporting other major currencies to limit losses.


10 -year US bond yields rose higher to a 3 -month high of 1.48%, also a factor in the rise for the US dollar.