Weekly Roundup: Pound slumps as British economic outlook darkens
Amy Richards September 18th 2023 - < 1 minute read
After a muted start to the weak, the pound then began to face notable selling pressure following a mixed jobs report. Although wage growth remained at a record high, signs of a cooling labour market rattled GBP investors.
A larger-than-forecast contraction in the UK’s July GDP report saw Sterling slump midweek, although the pound managed to claw back these losses amid an improving market mood.
However, fears that the UK economy could be slipping into a recession persisted through to the end of the week, pushing the pound lower.
On Friday, news that the number of British companies going bust rose by 19% year on year in August added to growing economic woes. Sterling ended the session on the defensive.
The week ahead could bring significant volatility to GBP exchange rates, with plenty of high-impact data due to be published.
In the spotlight is the Bank of England’s interest rate decision on Thursday. With a 25bps hike priced in, investors will be focusing on the bank’s forward guidance. A dovish tone could see GBP slump, while a hawkish tilt may see the currency soar.
The BoE’s decision may be heavily influenced by August’s consumer price index, due out on Wednesday. Could an expected uptick in inflation prompt markets to price in more rate hikes and therefore lift Sterling?