Now that last week’s busy economic calendar is out of the way, this week feels like more of a typical August week where economic data releases can be quite limited.
The Pound to Euro exchange rate remains around the 1.1600 level, and yesterday there was little market movement throughout the entire day of trading.
The Bank of England’s decision to hike interest rates by 0.25% as widely expected resulted in another drop for the Pound in the 24-hours after the announcement, which is a pattern we’ve seen frequently after rate hikes from the BoE. Perhaps this was due to the outside chance of another 0.5% rate hike not materialising.
Usually there would be a number of speeches from members of a central bank in the wake of an interest rate change although in this instance that’s not the case. The BoE chief economist Huw Pill spoke yesterday which had no impact on GBP exchange rates, and that speech was the only one scheduled for the week by a BoE policymaker.
Moving forward the path for monetary policy remains uncertain, so I expect economic data releases to be followed closely as they could determine the policy outlook throughout the rest of 2023. The expectation is for the BoE to hike rates up to around 6% by the end of the year, so if economic data releases result in a deviation from this number, we could see GBP exchange rates readjust.
On Friday, UK GDP will be released in one of the only data releases of the week for the UK. This could be followed very closely for this reason and 0.2% annualised growth is expected.
Outside of the UK the US Inflation report will be released on Thursday which could alter GBP/USD exchange rates, so this is also worth being aware of.
