The U.K. National Statistics Office presented its inflation release for May. Both indicators (core and overall inflation) came out worse than the median forecasts, which leaves the Bank of England no choice but to raise interest rates tomorrow and declare the need for further tightening of monetary policy.

This is a moderately positive signal for the pound. Why moderate? Initially, investors will expect the monetary regulator to make tough statements that monetary authorities are ready to aggressively raise rates in order to solve the inflation problem once and for all, but in practice it might be much more modest, as the Bank of England will find it difficult to raise rates, as it might provoke a banking crisis.

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