If you buy or sell pounds for your business requirements or are in the process of buying or selling a property abroad, you should keep an eye on the Bank of England’s commentary for the next 10 days. Forecasters have suggested there is a 70% chance the Bank of England will change monetary policy, however this week the pound has been on the decline as recent economic data may force the Bank of England to hold fire until 2018.
UK inflation numbers improved by 0.1% however this isn’t an improvement that suggests a rate hike is guaranteed. After the inflation numbers the Governor of the Bank of England confirmed inflation would continue to rise however dodge questions that an interest rate in November is inevitable. Furthermore Deputy Governor of the Bank of England Sir Dave Ramsden later this week confirmed his worries in regards to wage growth and hinted he is unlikely to raise rates.
With the Bank of England’s dovish stance this week, I think they are pricing into the market that an interest rate hike is not guaranteed. I agree with Sir Ramsden that wage growth numbers are lagging behind inflation and the key question the Bank of England need to ask themselves is are they prepared to put further pressure on citizens pockets? A report this week showed that the average UK pay is now at 2006 levels. This report was released by by The Resolution Foundation.
My predictions is for the Bank of England to hold off next month which would lead to further sterling weakness, however it appears that the traders at poundsterlingforecast are split which means the pound could increase of decrease by a couple of percent in the upcoming weeks off the back of the decision.
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