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Hawkish BoE prompts brief spike in the pound

It was another week of volatility for most major currencies last week, with the pound showing some of the most notable movement in the wake of the Bank of England’s latest rate decision.

The start to this week’s session is slightly calmer however, with GBP/EUR holding at €1.1362, while GBP/USD slides to US$1.3233.

Looking ahead, an EU summit later in the week is likely to prompt significant movement in Sterling, while a slew of German data is likely to dictate movement in the euro.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]It was another mixed session for the pound last week, with Sterling fluctuating in the face of Brexit uncertainty and a hawkish shift within the Bank of England (BoE).

It was a slow start for the pound again last week, with GBP exchange rates sliding on Monday as the British Chambers of Commerce (BCC), downgraded its UK growth forecasts for 2018 to their lowest levels since the financial crisis.

This downturn in Sterling was then extended as the UK government’s EU withdrawal bill was defeated in the House of Lords.

While the bill was eventually passed on Wednesday, the resulting Brexit fallout remained a major drag on GBP throughout the week.

However this was not enough to prevent the Pound from soaring on Thursday in reaction to the conclusion of the BoE’s latest policy meeting.

This saw Sterling sentiment race higher as a split vote in the bank’s Monetary Policy Committee (MPC) prompted speculation that the BoE could be on track for a rate hike later in the summer.

However the Pound struggled to cling onto these gains at the very end of the week, with the currency dipping as focus returned to Brexit following reports that a number of businesses operating in the UK had threatened to pull investment for fear of a ‘no deal’ exit from the EU.

Looking ahead, the focus for GBP investors this week will likely remain on Brexit ahead of an EU summit in which the topic is expected to dominate.

Further impacting Sterling is likely to be the UK’s final reading of its first quarter GDP data, with economists forecasting that it will confirm domestic growth slowed to just 0.1% at the start of the year.[/vc_column_text][/vc_column][/vc_row]