Sterling improves following NIESR report – where will the pound go next?
The pound enjoyed a more positive session yesterday following the release of the NIESR’s (National Institute of economic and social research) economic forecast for the UK in 2023. Their research contradicts the predictions that have come from the Bank of England for a lengthy recession and forecasts that the UK will avoid a technical recession in 2023.
Sterling was buoyed by the news which moved GBPEUR to a 7-day high, raising the rate from the 4-month low of 1.1135 seen on Friday afternoon. Cable (GBPUSD) also showed signs of improvement following a tough start to the week.
The dollar gained ground across the board following the Federal reserve’s interest rate decision on Wednesday with many expecting the Fed to begin ending their current rate hike cycle, however, positive jobs (non-farm payroll) data released on Friday has increased the probability of US interest rates moving higher than expectations. A strong reading of US CPI data next Tuesday will fuel the expectations of further rises and could support the greenback in the near-term.
A transfer of £200,000 is buying €2800 more vs the low last week, which may present a window of opportunity for sterling sellers that expect the negative rhetoric surrounding the UK to continue moving forward.
Economic data is light from the UK today, however, at 09:45, governor of the Bank Andrew Bailey and chief economist Huw Pill will be questioned by parliaments treasury select committee. MP’s will ask ‘is the Bank of England behind the curve on inflation?’ and what further measures will they take in order to combat the current economic crisis. Comments surrounding the economic outlook and future interest rate policy could provide volatility for sterling exchange rates.
Tomorrow morning is key for UK economic data with GDP, industrial production and manufacturing production all being released at 7am. The GDP reading could be a significant driver for sterling exchange rates moving forward. A negative reading would support the BoE’s forecast for a recession where a positive reading would support the NIESR’s report.
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