Monthly Wrap: GBP – Pound rocked by uneven data and mixed messages from the BoE

Philip McHugh February 8th 2024 - 2 minute read

Key takeaways: 

  • Pound fluctuates on conflicting outlook from BoE 
  • Mixed data also injects some volatility 
  • GBP Monthly lows: €1.16, $1.25, AU$1.89, NZ$2.03, C$1.69 
  • GBP Monthly highs: €1.17, $1.27, AU$1.94, NZ$2.09, C$1.72 

The pound got off to a fairly positive start in 2024, with the currency trending broadly higher through January.  

However, Sterling’s ascent was far from smooth as some uneven UK economic data infused volatility into the currency. 

Supporting the pound was a stronger-than-expected expansion of the UK’s service sector through December and January, as well as a surprise acceleration in domestic inflation at the end of 2023. 

On the other hand, Sterling sentiment was undermined by underwhelming GDP and retail sales figures as they stoked UK recession fears.  

GBP exchange rates were also influenced by Bank of England (BoE) rate cut speculation. Bets that the BoE could begin loosening monetary policy as soon as April infused some volatility into the pound in the latter half of the month.  

GBP exchange rates were then rocked at the start of February, following some mixed messages from the BoE as it delivered its first interest rate decision of 2024. 

While the BoE pushed back against speculation of an imminent rate cut, with two members of the bank’s Monetary Policy Committee (MPC) actually voting for a rate hike, this was undermined by some dovish comments from BoE Governor Andrew Bailey in his accompanying press conference. 

Looking ahead, a key focus for GBP investors will be whether or not the UK slipped into a recession in the second half of 2023.  

The UK’s latest GDP figures will be published in the second week of February and could place significant pressure on the pound if they confirm growth contracted for a second consecutive quarter. 

Otherwise, the spotlight will remain on the UK’s latest jobs report and inflation figures, as these will help GBP investors to gauge when the BoE might begin cutting interest rates. 

Written by
Philip McHugh

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