This GBP report looks at some of the upcoming factors that could affect Sterling exchange rates this week. The table here shows the market movements for a number of GBP currency pairs in the last week:

Currency Pair% ChangeDifference on £200,000
GBPAUD1.02%AUD $3518.76

Were the Bank of England right to hike interest rates earlier this month?

Questions marks have been raised regarding the Bank of England’s decision to hike interest rates earlier this month, after UK inflation held firm at 3% in October after predictions that the rate would breach the 3% mark.

The figure for October matched September's which is a five-and-half year high, and had previously prompted the Bank of England (BoE) to raise interest rates for the first time in 10 years which had pushed the Pound higher against the majority of major currency pairs.

Is UK inflation a key concern for Mark Carney?

In the wake of yesterday’s inflation figure the Pound was sold off quite heavily, as financial markets question whether the BoE was overly hasty in making their move, and also I would imagine that the chances of further rate hikes in the short term future has diminished which is another reason for the softening Pound. Those watching the Pound should consider how a Reuters poll immediately after this month’s rate hike showed that most economists don’t expect to see another hike until 2019, and considering the BoE had predicted to see inflation hit 3.2% in October I would now agree with those polled earlier this month.

Moving forward I expect to see the Pound continue to falter as a less aggressive monetary policy from the Bank of England is now likely.

Is Theresa May’s position being questioned, and how will this impact the Pound?

Another reason for the weakening Pound this week can be attributed to reports that apparently dozens of Conservative MP’s are ready to sign a letter of no-confidence regarding the PM’s position.

The figure being quoted is 40 MP’s, and should this be the case there only needs to be another 8 before yet another political upheaval could take place within British politics, which would surely work in favour of the opposition especially considering Jeremy Corbin’s surprising spike in popularity this year.

Should similar talks continue I would expect to see the Pound fall further, as political uncertainty often tends to have this effect on the underlying currency.

On Thursday a number of members of the BoE will be speaking and if any allusions to future monetary policies are mentioned there could be movement for GBP exchange rates. In the meantime I think this morning’s Average Earnings figures could be important as wage growth has been a key factor for the Pound recently, due to the rising rates of inflation.

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