Sterling has been pressured since the beginning of the year, we have seen GBPUSD drop from the highs of 1.35 post-election to the current levels of 1.2975.
This has been from weak data points and the Bank of England members bearish outlook. We have had a string of warnings from the Bank of England members, Broadbent, Carney, Tenreyo, Vlieghe and Saunders, who were all sounding the alarm bell in favour of weaker interest rates coming for the UK. Now, at the last BoE meeting, there were only two bank members voting for cuts. That number has risen and the odds of a rate cut at the January 30th rate meeting are now greater than 70%.
There has been a variety of data that has been poor including, GDP (month on month) which was down -0.3% last weeks a neutral expectation of 0%. We then saw month on month manufacturing down -1.7% against -0.3% and alongside this we also saw retail sales miss expectations with a paltry figure of -0.6% being posted.
Ultimately, all this data suggests that spending has dramatically slowed within the UK and should this continue we could see GBPUSD head back towards 1.27 or below and GBPEUR head below 1.16. It is a data-light day from the UK with no major market moving events likely, the next major data is out tomorrow with UK ILO Unemployment data out. From a UK perspective the market is likely to trade a tight range until the end of the month when we have the Bank of England rate setting decision.
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