Last week was a rocky road for GBP, with a sharp drop before the BoE’s announcement following by a surge after the decision to keep the rate steady was announced. With the decision from the Bank of England (BoE) holding rates, GBP restored its gains and pushed forward. This meant that earlier losses were recouped and the currency advanced on many of its rivals like the USD. The UK also saw the release of its manufacturing PMI today. The figure came in above predictions at 50.0, which has boosted support for the Sterling. Meanwhile, USD fares worse against GBP after many of last week’s safe-haven investors now return to the pound sterling. Investors now await key US data for their next cue as developments in global risk sentiment continue to unfold. For the sterling, the attention will turn to the UK-EU negotiations which get underway today. The pound could drop should Boris Johnson renew fears of a no deal Brexit in his initial speech.
GBP Finishes off the Week Strong With a Positive BoE Interest Rate Decision and Opens up With PMI Boost
Pound sterling saw a sharp rise on Thursday after its central bank, the Bank of England, announced that it had voted to keep the UK’s interest rates at 0.75%. This news meant that the pre-meeting jitters from investors were eradicated and saw support flood back in for GBP. Before the meeting many investors fled to safe haven currencies like USD which saw these currencies edge over the pound as it lost favour with the market amid the decision. But with the decision going in favour of GBP, it now looks to build on this success and its edge over its rivals.
Sterling continues its success today as its manufacturing PMI was released earlier this morning. The figure came in at 50.0 versus the expected 49.8. This has helped the GBP kick the week off in the right manner and prepares the currency for the opening week of Brexit negotiations. The figure reinforces the BoE’s decision to keep the cash rate steady as the economy looks to be growing and recovering.
Concerns Over GBP Outlook Following the UK’s Departure From the EU
Last week also saw the UK’s last day as a member of the European Union. The departure, which took place at 23:00 GMT on Friday, saw that the UK would no longer be a part of the EU and would not have any place within EU meetings. Though Brexit is far from complete, this was the first major milestone in the saga. Now the difficult stage of negotiating a trade deal between the EU and the UK begins. Investors are concerned with Britain’s outlook as the talks begin as the outlook is not clear-cut and there are many unknowns. Added to this, the Bank of England indicated that a UK interest rate cut is not completely out of the picture despite their decision last week.
USD Remains Resilient but Not Strong Enough to Handle GBP’s Rise
Meanwhile, USD remains relatively resilient, although not strong enough to combat the sterling’s rise last week. US data in recent sessions including price indexes have fallen short of predictions which has limited the currency. But all is not lost for USD, as it continues to benefit from the global uncertainty mainly caused by the coronavirus outbreak. Many investors have found safety in the currency and thus sees the currency rise.
Looking ahead, the UK awaits its manufacturing PMI, which is due later today, with construction to follow on Tuesday and services and composite statistics on Wednesday. If these stats fall short on expectations GBP will likely diminish. As for the USD, their manufacturing PMI is due later today, followed by factory orders on Tuesday, trade balance and non-manufacturing PMI on Wednesday and finally January’s key non-farm payroll report on Friday. Attention will turn to these figures over the course of the week which will likely shape the GBP/USD pairing as each release is unveiled.
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