By Matthew Vassallo
The Pound’s mini resurgence came to an abrupt halt following the Bank of England’s latest policy meeting, despite the central bank raising interest rates by a historically significant 0.5%. Sterling saw its value drop by over 0.7% against the Euro, whilst also losing just under a cent against its US counterpart. Both currencies held firm for the most part as the trading week came to a tepid close for the Pound.
GBP’s downturn was particularly poignant due to two key factors. The first being the market’s initial reaction to the BoE’s 0.5% hike, which was the highest rate increase in 27 years. Historically an upward trend in interest rates brings with it a surge in investor confidence, with the result generally being a positive one for the currency in question. However, the underlying factor that has seemingly overridden any positive outlook were the comments made by BoE Governor Andrew’s Bailey and his ominous prediction that the UK economy was heading towards a recession by the end of this year.
Whilst this news is not likely to come as a complete shock to the majority of financial analysts who have been predicting this sombre outcome for some time, it is the first time the central bank has confirmed it in any of their public address’s.
In the background we have seemingly overnight been hit by a widespread shortage of NHS dentists, with the focus being on how Brexit has now restricted a large proportion of EU nationals from working freely within the UK, thus stunting, and debilitating the industry’s professional workforce.
This will likely be brought into the spotlight as the Tory leadership race continues, with frontrunner Liz Truss seemingly well behind in various national polls but still with what would seem a healthy lead amongst the voting Conservative membership group.
Looking ahead and it’s a sparse week for UK data for the most part. This will lead to even more focus on Friday’s key economic releases, which include UK Gross Domestic Product, Goods Trade Balance & Manufacturing & Production data. On the same day Eurozone Industrial Production and US Import/Export figures are also worth keeping an eye on.