Despite there not being much movement for GBP exchange rates today, it may well of been a key day for Sterling’s value moving forward as some key data releases came out this morning.
The rate of inflation in the UK, as expected, has hit a 5-year high at 3%. Because this figure was expected to be released today the Pound didn’t react much during the release at 9:30am this morning, although I think if the figure was higher we would have seen a stronger Pound has the likelihood of an interest rate hike in the short term future would be more likely.
The governor of the Bank of England, Mark Carney spoke earlier and dampened some investors hopes of a rate hike in the UK, as although the rate of inflation has hit a 5-year high his comments didn’t such that a rate hike is guaranteed anytime soon. There had been hopes of a hike early next month but his comments suggest this could be pushed back.
He also said that businesses are losing confidence in a smooth Brexit which also softened the Pound slightly across the board.
Moving forward I think that if the rate hike doesn’t happen in November, there could be a sharp sell-off in Sterling’s value. Later this week there will be another key data release out of the UK although this one is unlikely to be as data sensitive as todays. Retail Sales data will be released at 9.30am so expect deviations in Sterling’s value if the figure released doesn’t meet analyst’s targets.
There has also been a lot talk surrounding a Paris based think-tanks (OECD) recent report on the UK economy, whereby they’ve predicted that if the Brexit decision was reversed the economic benefit to the UK would be significant.
The report also warned against a Hard Brexit as it would hurt trading relationships and reduce long-term growth in the UK and it does appear to have impacted markets.