The Pound has found some support during Thursday’s trading against the majority of major currencies, following a sharp downturn yesterday.
GBP/EUR rates have held firm around 1.15, whilst the Pound has found plenty of protection around 1.42 against the USD.
The fact Sterling managed to curb any further losses today is somewhat surprising, considering how poor UK Retail Sales figures were. The official figure of -1.2% came in well below expectation but a poor showing may well have been factored into Sterling’s current value by investors.
This is due to the expectancy of a drop due to last month’s particularly poor weather and the now infamous Beast from the East, which would seriously have hampered high street sales.
Up until yesterday the Pound had performed well for a prolonged period, backed by a strong run of UK economic data and progress with Brexit talks. I think the Pound’s rise was supported by a lack of media coverage around Brexit, with events in Syria and an increasingly strained relationship with Russia taking centre stage.
There was further good news earlier this week, with confirmation that UK wage growth had risen above inflation for the first time in a year.
However, this positive run came to sharp halt yesterday morning, following the release of the latest UK inflation data.
Inflation fell to 2.5%, which was under the markets predicted market figure of 2.7%, which immediately put pressure on Sterling.
Whilst this could be viewed as a positive in the sense that it is creeping back towards the government’s target level of 2%, it has also dampened expectations of a prospective interest rate hike by the Bank of England (BoE).
This potential rate hike had most likely been factored in to Sterling’s value, at least to some extent by investors, as such yesterday’s data has dampened the markets expectation and as investors have sold off their Sterling positions.
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