Sterling was lifted on Thursday by signs of progress in divorce negotiations between Britain and the EU, with the bloc’s chief negotiator Michel Barnier Barnier saying the two sides had ”had a constructive week“, though they were ”not there yet.
Sterling skidded on Friday, hitting a one-week low against the euro after data showed Britain’s economy recorded its weakest annual growth since 2013 in the second quarter of the year.
GDP figure delivered a stark warning of the trouble that lies ahead for the UK. The last time the UK GDP figure read 1.5 percent was almost four years ago in an economy that was moving away from the shadows of the 2008 financial crisis. A modern-day crisis now hangs over the UK economy.
Friday’s data showed year-on-year gross domestic product growth slowed to 1.5 percent in the second quarter from 1.8 percent in the first three months of the year.
The pound was already on the back foot after Bank of England Governor Mark Carney said on Thursday that the economy was on track for an interest rate rise in the “relatively near term”. That cooled expectations of a hike in November, when the Bank releases its next quarterly Inflation Report.
Most economists now expect the BoE to raise its Bank Rate to 0.50 percent from 0.25 percent at its next policy meeting on Nov. 2.
Next week, all 3 of the U.K.’s PMI reports are due for release, making it an important week for sterling. The Bank of England shifted the trajectory for the currency when they suggested that rates would need to rise. Since then we haven’t had much in the way of market moving data although second quarter GDP was revised lower and mortgage approvals increased by a smaller amount in August.
Next week’s PMI reports will be exceptionally important. If manufacturing, service and construction sector activity accelerate, it would validate the BoE’s calls for tightening and reinvigorate the rise in pound sterling. However if manufacturing and/or service sector activity slows, it would cast doubt on the central bank’s plans and cause the currency to give up some of the gains that it enjoyed in September against the dollar and the euro. Bank of England Governor Carney spoke last week and while his speech was highly anticipated he did not shed new light on the central bank’s policy plans.
Sterling skidded on Friday, hitting a one-week low against the euro after data showed Britain’s economy recorded its weakest annual growth since 2013 in the second quarter of the year.
GDP figure delivered a stark warning of the trouble that lies ahead for the UK. The last time the UK GDP figure read 1.5 percent was almost four years ago in an economy that was moving away from the shadows of the 2008 financial crisis. A modern-day crisis now hangs over the UK economy.
Friday’s data showed year-on-year gross domestic product growth slowed to 1.5 percent in the second quarter from 1.8 percent in the first three months of the year.
The pound was already on the back foot after Bank of England Governor Mark Carney said on Thursday that the economy was on track for an interest rate rise in the “relatively near term”. That cooled expectations of a hike in November, when the Bank releases its next quarterly Inflation Report.
Most economists now expect the BoE to raise its Bank Rate to 0.50 percent from 0.25 percent at its next policy meeting on Nov. 2.
Next week, all 3 of the U.K.’s PMI reports are due for release, making it an important week for sterling. The Bank of England shifted the trajectory for the currency when they suggested that rates would need to rise. Since then we haven’t had much in the way of market moving data although second quarter GDP was revised lower and mortgage approvals increased by a smaller amount in August.
Next week’s PMI reports will be exceptionally important. If manufacturing, service and construction sector activity accelerate, it would validate the BoE’s calls for tightening and reinvigorate the rise in pound sterling. However if manufacturing and/or service sector activity slows, it would cast doubt on the central bank’s plans and cause the currency to give up some of the gains that it enjoyed in September against the dollar and the euro. Bank of England Governor Carney spoke last week and while his speech was highly anticipated he did not shed new light on the central bank’s policy plans.
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GU down as expected
