Trade in the Pound remained highly erratic on Wednesday as the Bank of England (BoE) announced an intervention in the bond market.
GBP investors were left dismayed by a surprise contraction in UK GDP in April, as well as an unexpected rise in domestic unemployment and the growing gulf between inflation and wage growth.
Reinforcing Sterling’s initially losses was renewed Brexit uncertainty amidst fears of a UK-EU trade war after the UK government unveiled a bill aimed at unilaterally altering the Northern Ireland protocol.
The pound then bounced back in the middle of the week as losses in the first half of the session made it an attractive prospect to more price conscious investors.
The Bank of England’s (BoE) rate decision the accelerated this uptrend on Thursday. While the bank only raised rates by a modest 25bps, GBP investors seized on the BoE’s forward guidance as it hinted at plans to accelerate its tightening cycle in the future.
Turning to this week, the primary catalyst of movement for the pound is likely to be the publication of the UK’s consumer price index.
Could we see another surge in inflation last month weigh on Sterling sentiment as it stokes UK cost of living concerns?
Meanwhile, the UK’s preliminary PMIs could dent GBP exchange rates later in the session if UK service sector activity continued to slow this month.
Closing out the week will be the latest UK retail sales figures, with the pound likely to stumble if sales growth contracted as expected in May.
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)