Sterling Soars, as FX Focuses on Inflation View

Sterling is the best performer of the day after the bank of Englands quarterly inflation report raised its near term inflation outlook to level higher than projected 3 months ago (see below). The aggressive inflation forecast overshadowed the banks growth downgrade, making GBPJPY, GBPCHF, GBPNZD and GBPUSD the top performing currency pairs out of a group of 38 pairs.

The BoE said inflation would peak at 5% in Q4 2011, higher than the previously projected 4.5%. Inflation would then remain above the 2% target throughout 2012 before falling to 2.4% in Q4, higher than 1.7%. FX markets shrugged the BoE growth downgrade of its 2011 GDP view to 2.7% from the February forecast of 2.9%, with the assumption of no change in interest rates. It also lowered its 2012 GDP growth forecast to about 2.8% from the earlier 3.2%.

GBPUSD hit a high of $1.6517, taking out our $1.6430 stop. Stay tuned for our Premium Piece coming up later today for the latest detail on GBPUSD techs, EURCHF. Euro is the day's worst perfomer. http://www.ashraflaidi.com/products/sub01/

AL