Weekly Roundup: Pound rallies as markets bet on BoE hikes
Amy Richards August 21st 2023 - < 1 minute read
Sterling saw a muted start to last week’s session as GBP investors waited for more impactful data.
On Tuesday, however, strong wage data boosted the pound. UK average earnings growth unexpectedly rose to a record high of 7.8% in the second quarter of 2023. This prompted fresh bets on more Bank of England rate rises.
The UK’s consumer price index on Wednesday added to the upside. Although headline inflation fell sharply, in line with forecasts, core inflation held steady at 6.9% in July rather than easing to 6.8% as forecast.
Expectations of more BoE rate hikes lifted Sterling higher through to the end of the week, until a sharp slump in UK retail sales put a lid on GBP’s gains.
British sales shrank 1.2% in July, far worse than the forecast 0.5% contraction, raising concerns about the UK economy.
Looking at the week ahead, the key release will be the UK’s flash PMIs on Wednesday. A further deterioration in British private sector activity could weigh heavily on Sterling.
New data from the Confederation of British Industry (CBI) could have a lesser impact on GBP exchange rates. Could another fall in retail trade dent the pound?
Written by
Amy Richards