After a fairly muted start to 2024 for GBP exchange rates, the outlook what which factors could influence the currency moving forward have become clear.
The Bank of England, European Central Bank and the Federal Reserve Bank in the US are all expected to begin cutting interest rates later this year. But the BoE differs in that the cuts are expected to begin later this year, and the number of cuts is expected to be slightly less.
This is due to the inflationary pressures within the UK remaining elevated compared to the UK’s peers.
Moving forward, data releases which show signs of inflationary pressures expanding or contracting along with the UK’s economic health could influence the BoE’s monetary policy changes and therefore the Pound’s value.
A busy week of economic data releases is due this week which could influence the Pounds value, especially if the data releases deviates from the market expectations.
Later today the Governor of the BoE, Andrew Bailey will be speaking at Loughborough University. He voted in favour of keeping rates on hold at the BoE’s last vote and as ever his choice of language when describing the economy will be closely followed.
Monthly wage data is due for release on Tuesday and Inflation data will be released on Wednesday in the form of CPI. UK GDP figures are due out on Thursday. Thursday’s release will determine whether the UK has dipped into recession or not so GBP exchange rates could come under pressure if the growth in Q4 of 2023 was lower than expected.
Retail Sales will then be released on Friday which is an economic update that can cause volatility for the Pound too.
Generally speaking, better than expected data released could push back the BoE’s plans to begin cutting rates and could see the Pound strengthen.
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