GBP Forecast – Sterling Struggling to Regain Ground After Last Week’s Losses

GBP EUR Higher Despite Dip in Inflation Figures

The Pounds has failed to recover from its losses on Friday, with investors once again seemingly turning their backs on Sterling.

Friday’s poor UK Gross Domestic product (GDP) figures have sapped investor confidence and dampened the markets expectations, regarding a rate rise by the Bank of England (BoE) at their policy meeting next Thursday.

It had been widely anticipated that the central bank would raise rates in line with a strong run of UK economic data but with the latest set of inflation figures falling back towards the government’s target of 2%, the first seeds of doubt were sewn regarding the prospective rate hike.

With inflation falling it could be argued that the central bank would no longer need to raise rates in order to try and artificially drive levels down. This in turn caused a sell of Sterling positions and the Pound weakened as a result.

It looked as though Sterling had managed to bounce back, recovering above 1.15 against the EUR and making inroads against the greenback back towards 1.40.

However, last week’s GDP figures once again caused the Pound’s value to dip at a rather alarming rate. The official figure of 0.1% growth was well under the markets predicted result and the Pound has once again found itself facing an uphill battle over the coming days.

It is now far more unlikely that the BoE will raise rates next week in my opinion, with the 0.25% rise likely to be pushed back until further data is analysed over the coming weeks.

It may well be that BoE governor Mark Carney will give the markets more of an insight in his subsequent press conference and of course a lot can change in a week.

The Pound has actually managed to find some support around the current levels, breaking back above 1.14 against the EUR for a short period earlier this afternoon.

Cable rates however have dipped slightly again with the Pound struggling to make any impact above 1.38. With the USD likely to be well supported around 1.40 even if Sterling some momentum, I don’t anticipate this threshold to now be broken over the coming days.

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