Sterling has taken a battering in the last couple of weeks due to weaker than expected inflation data and indications that wages are rising slower than prices meaning the average Brit has less disposable income. Add to the fact that manufacturing figures showed almost no growth last month, Moodys have downgraded the UK’s AAA status, and there is a lot of political uncertainty about what may happen in the UK election next year, it is easy to see why sterling has lost some of its recent shine.
Most economists are pushing back interest rate forecasts for the UK to the middle of 2015 now as opposed to early next year, so unless UK data improves sharply we are unlikely to see a huge boost for sterling. The Bank of England Minutes next week could be very important- if it shows no additional members have joined the 2 dissenting voices, sterling could sit pretty flat for a while. If by some minor miracle another member has voted to hike rates, then sterling could rally back sharply so this is well worth keeping an eye on.
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