Last week, the Bank of England’s (BoE) policy makers voted unanimously to keep current interest levels on hold at 0.75%, which was just 24 hours after the US Federal reserve decided to cut levels for the first time in a decade.
Whilst the UK economy has seemingly suffered from the ongoing Brexit uncertainty, and the GBP most likely suffering from the growing reports that the UK could crash out without a deal come October 31st, the Central Bank’s policy makers still suggested that interest rate levels would still need to rise.
Following the decision, the Central Bank’s Governor Mark Carney announced that due to the uncertainty, growth forecasts for the next 12 months had consequently been downgraded from 1.5% to 1.3%, which would mark the weakest economic expansion since 2012, but did go on to suggest that he believed a smooth exit deal from Brussels could still be reached.
Despite this, reports from the Central Bank have since warned that even if a deal is reached within the next 90 days, there was still a “one-in-three” chance that the economy could slip into a recession in the first Quarter of 2020.
This was the Central Banks first set of forecasts since Boris Johnson became Prime Minister and it may be the final policy meeting before the UK separates from the EU at the end of October.
Sterling currency markets have most likely been under pressure due to the political uncertainties surrounding Brexit, domestic economic data could also an area of interest for investors and the latest releases this week could affect sentiment in the currency.
This morning, Markit Services PMI data will be released, with current expectations leaning towards a slight contraction for the sector.
Friday will then see the release of Industrial production and manufacturing data, which will be followed by the announcement of the Gross Domestic Product (GDP) figure for Q2 which may be closely watched by investors, considering the recent warnings from the Bank of England and various economic sources that the UK economy is creeping towards a recession.
Initial reports suggest that the figure could see a drop-off by as much as 0.5% from the previous, which would see growth for the quarter at 0.0% and could be a cause for concern for sterling currency markets.
Clients anticipating an up coming transfer involving the pound, may wish to contact their account manager here at Foreign Currency Direct if you would like to be kept up to date with the latest market information.
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