The Pound commenced last week much higher against the Euro & US Dollar due to Bank of England’s hint of an interest rate hike. However, the pound has fallen against the Euro and USD towards the close of trading on Friday last week.
Inflation data for the UK superseded the Bank of England’s forecast in August and is expected to reach nearer the 4% mark later this year. GDP growth and retail sales over the summer period has been less than expectations which may dampen the likelihood of an interest rate hike in the short term.
Many of the recent data releases are suggesting that recovery of the economy is underperforming against the BoE’s forecast. It is unclear whether this will deter the BoE from adjusting monitory policy. Bank of England Governor, Andrew Bailey, have acknowledged signals of a slowing pace of economic recovery in the parliaments Treasury Select Committee at the back-end of August. They also commented on rising inflation which may prompt an interest rate hike to push inflation in and around the 2% sweet-spot.
This week, both the UK and US will have interest rate decisions which will be the key events to keep an eye on. The markets are expecting both to leave interest rates unchanged at 0.1% for the UK and 0.25% for the US. With Bank of England meeting minutes and US Fed press conference following the decision; traders, investors, analysts will be keeping their eye peeled for any indication/inclination of when an interest rate hike may come.
