Daily FX
British Pound Comes Within a Whisker of 2.05
Tuesday July 17, 5:58 pm ET
By Kathy Lien, Chief Strategist strategist@dailyfx.com

The British pound climbed to another 26 year high after consumer and retail prices rose more than expected in the month of June. The annual pace of retail price growth increased from 4.3 to 4.4 percent, indicating that inflationary pressures are still a big problem in the UK.

This means not only could we be looking at 6 percent interest rates over the next few months, but more immediately, the price action in the British pound suggests that traders are looking for the minutes from the Bank of England meeting earlier this month to reveal a unanimous if not close to unanimous decision to raise interest rates. Anything short of 7 out of 9 votes in favor of a rate hike would be construed as dovish. The bigger risk is certainly to the downside given the extent of the recent rally. In addition to the minutes, we are also expecting the UK?s labor market report for the month of June. If wage growth slows as expected, 2.05 could be the peak in the GBP/USD.