The pound tumbled yesterday after the Bank of England (BoE) forecast a UK recession beginning in the fourth quarter of this year.
However, downbeat comments from Bank of England (BoE) policymaker Michael Saunders chipped away at GBP’s gains.
Sterling then wobbled as the cost-of-living crisis applied some pressure. Data from the British Retail Consortium (BRC) revealed a 1.7% year-on-year decline in retail sales in April as the income crunch dented consumer spending.
As the week went on, Brexit woes began pushing the pound lower. The government restated plans to alter the Northern Ireland protocol if an agreement couldn’t be reached. Paired with a sudden slump in risk appetite, this saw Sterling drop sharply.
Despite an unexpected contraction in UK GDP in March, the pound was able to recover, boosted by more dip-buying after it entered oversold conditions.
However, with the cost-of-living crisis and Brexit fears weighing on the UK currency, Sterling’s rally fizzled out rather quickly.
So far this week, Sterling has wavered. Boris Johnson toned down his Northern Ireland rhetoric ahead of a trip to Belfast. This may have alleviated Brexit concerns somewhat.
Looking ahead, the key release is the UK CPI on Wednesday. Inflation is forecast to jump from 7% to 9.1%. With the BoE seemingly near the end of its rate hike cycle, such a surge in inflation could hurt GBP.
UK retail sales could also have a big impact on the pound. Economists expect another decline in sales as real incomes continue to fall, dampening spending.
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)