- GDP figures up YOY and QOQ
- BoE to keep interest rates on hold?
- Sterling could weaken further
This morning’s GDP figures YOY and QOQ came in higher than anticipated, 2.2% and 0.6% respectively, highlighting just how resilient the UK economy was to a potential Brexit. Whilst these figures are positive, it does not contain data from July, we are still yet to see how the impact of Brexit has had on the British economy.
Despite these limitations in the latest figures, markets would have reacted to the news quite positively giving Pound Sterling a fighting start to the trading day.
How will the Bank of England view the latest data? Will Mark Carney hold fire until more data comes to light?
Bank of England to cut interest rates next Thursday?
It’s unclear how the Bank of England will react to this morning’s figures, their previous “wait and see” stance may well push an interest cut back, data for the month of July is yet to be announced and the decision on August 4th could be too soon for them to act.
If the BoE cut rates, GBPEUR could fall to 1.15, whilst a hold on rates could see rates back into the low 1.20’s. More importantly, the state of the UK economy outweighs any decision by the Bank of England when it comes to exchange rates. If the UK were to hit a recession, we may see even further weakness for the Pound.
Sterling could weaken further
With post-Brexit economic releases still yet to be observed, there is always the potential that Sterling could weaken further. Coupled with the uncertainty surrounding Brexit and the Bank of England’s potential for intervention, it’s unlikely that the Pound will strengthen until negotiations with the EU are on the table.
If you need to buy currency in the mean-time, buying ahead of the Bank of England’s interest rate decision could save you financially.