Last week the main event was the BoE interest rate hike, where the Central Bank raised interest rates by 25bps- but kept the stance of more hikes COULD happen if inflation were to go higher again, and that rates will stay high for at least a couple of years before any cuts are considered.
Sterling dropped a little following the announcement, however, generally, I would say the decision was quite supportive for the Pound and lays out a positive roadmap for those selling Sterling. With the BoE, Fed and ECB all mirroring each other with their speeches, essentially the markets will now move on whoever was to hike/cut next- I can see GBPEUR moving slightly higher now over time with this thesis and potentially GBPUSD depending on how the Fed acts next.
Now data will be the main focus for all economies- we can focus on what we have ahead of us this week; which unfortunately is not a lot- on Thursday we have core inflation for the U.S, where we are expecting a drop to 4.7%, and general inflation to rise to 3.3%- overall this wouldn’t be enough to encourage a cut from the Fed, so this will remain supportive for the U.S Dollar.
On Friday we have GDP figures from the UK which are expecting to show growth of 0.1% over the last quarter, and 0.2% year on year- which is better than previously anticipated so as long as we don’t get any negative surprises then this data should be supportive for Sterling. Alongside GDP, we also have trade balance, industrial production and manufacturing production data out which is all expected to improve compared to last releases.
Overall we are not expecting a very volatile week- if you have any upcoming transactions that you wish to discuss please don’t hesitate to contact me directly.