British Pound (GBP) Exchange Rate: Sterling Slips Ahead of BoE Report
The Pound recovered losses against its major currency rivals last week as the NEISR GDP estimate indicated that the UK economy expanded by 0.8 per cent in January following growth of 0.7 per cent in December.
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Sterling gains were slightly limited as UK industrial/manufacturing production figures disappointed, but the nation’s trade deficit did decline unexpectedly, countering the adverse impact of the less-than-impressive reports.
However, over the course of European trading on Monday the Pound snapped its recent run of gains against the US Dollar and softened against the Euro.
The Pound is currently trading against the US Dollar in the region of 1.6397 and against the Euro in the region of 1.2036.
The Pound posted modest but widespread declines as economists bet that the Bank of England will offer updated guidelines regarding the raising of interest rates when the central bank’s quarterly economic outlook report is published later this week.
Previous forward guidance tied the increase of interest rates to the unemployment rate falling to 7 per cent, but as unemployment is dropping faster than anyone had anticipated, this stance needs revision.
In the opinion of one London-based industry expert; ‘With forward guidance in its current form nearing an end, markets will look for [BoE Governor Mark] Carney to indicate how the bank will change its communication. Carney is likely to remain dovish. We see the Inflation Report as a downside risk for Sterling.’
This morning’s Lloyd’s employment confidence gauge, which advanced from -12 to -2 in January, had little effect on the Pound.
While the BoE inflation report is the week’s major UK news, investors will also be taking an interest in tomorrow’s British Retail Consortium’s like-for-like sales figures.
Sales are expected to have increased by 0.8 per cent in January, year-on-year, following an annual increase of 0.4 per cent in December.
Other UK reports to be aware of include RICS House Price Balance (due out on Thursday) and Friday’s seasonally adjusted construction output figures.