The pound has improved slightly against the euro on Monday. This questioned investors if the Bank of England (BoE) would raise interest rates in May, following weaker-than-expected economic outputs and ‘mixed UK economy data’ comment from BoE governor Mark Carney.
On Monday, the pound-to-euro exchange rate is at 1.1420. The pound recovered and rose 0.3 percent to 87.515 pence. In the previous week, the pound had been as high as 1.1599 and also fell hard at 1.139.
The GBP/USD traded flat at $1.3997 after earlier hitting a two and a half week low of $1.3984. The US dollar’s continuous increase and strength keep the pound under pressure.
Analysts say they would keep an eye on the gross domestic product figures in the whole week. The figures will show possibility if the BoE could delay rising rates until later in the year.
“We think the UK data this week may be enough to rekindle rate hike expectations,” said ING FX analyst Viraj Patel.
The pound has been one of the top performing major currencies in 2018. It reached its highest level last week since the Brexi referendum in June 2016.
However, weaker-than-expected wage and inflation made a huge impact on the currency downfall—sliding almost 1.7 percent. Consumer inflation in the United Kingdom fell from February’s 2.7 percent to 2.5 percent in March. The fall has also been linked to the negative inflation data released which, according to the Office for National Statistic (ONS), recorded its lowest figures to date this year.
Unlikely to Recover
TorFX currency analyst Laura Parsons said that the pound’s fall was linked to the low inflation data. She added that the low inflation rates could negatively impact interest.
Britain’s distressed retail sale figures and other concerns regarding the BoE’s interest increase will retain the pound ‘unlikely to recover’ over the weekend.
According to forecast, the BoE was to raise interest rates from 0.5 to 0.75 percent.
Parson also commented on Carney’s statement—saying that his remark caused the pound to flop over the weekend.
She said, “After starting last week strongly a spate of disappointing UK data and dovish comments from BoE Governor Mark Carney saw the pound give up gains before the weekend. GBP/EUR dropped from close to £1.160 to €1.140 over the course of the week.”
“While there is little in the way of UK news today, the pound could edge higher against the euro if the Eurozone’s run of services and manufacturing figures indicate a slowing in output in the currency bloc”, she added.
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