020 7898 0500Recent movement has been more sideways that upwards for sterling and this week was no different as we had a mixed week where we saw initial gains for sterling eroded following more dovish-than-expected minutes from the Bank of England (BoE) on Thursday.
A quiet start to the week saw Purchasing Managers’ Index (PMI) data from the manufacturing and construction industries largely ignored, with less than forecast figures from both sectors overlooked ahead of Thursday’s so-called ‘Super Thursday’. Early release of National Institute of Economic & Social Research (NIESR) economic growth predictions saw sterling strengthen across the board on Wednesday, as investors saw the prediction of a February 2016 interest rate hike as positive signal for Thursday’s announcement from the BoE.
Thoughts of multi-year highs for sterling were erased yesterday, however, as the minutes from the latest BoE policy meeting showed only one dissenter voting for an interest rate increase. This went against the consensus that two members of the monetary policy committee would be in favour of a rate hike. Together with comments that low energy prices could affect inflation through to 2016, and that there is no set timeline for interest rate hikes, investor confidence in sterling was somewhat dented. This sent sterling to its lowest level in two weeks against the US dollar, and resets predictions of when the BoE will act.
Following a data-heavy week, sterling markets look set to catch their breath today, with only the US non-farm unemployment figures likely to have a significant impact on markets.
