[vc_row][vc_column][vc_column_text]Pound plunges as soft UK data drags on BoE rate expectations

The pound was hit by considerable losses last week as a run of soft UK economic data drove the currency lower on fears it could prevent the Bank of England (BoE) from raising interest rates next month.

Meanwhile the start of this week looks be more subdued with GBP/EUR holding at €1.1218, while GBP/USD remains muted at US$1.3136.

Looking ahead, the euro is likely to be in focus this week, with the latest Eurozone PMI releases and the European Central Bank’s (ECB) July policy meeting likely to prompt some significant movement in the single currency.

The pound saw a heavy sell-off last week, with a run of lacklustre UK data prompting markets to shun the currency.

While weak data prompted the bulk of Sterling’s losses last week, the initial downturn was prompted by political uncertainty as a close vote on the UK government’s Brexit customs bill highlighted the growing division within the Conservative party.

However it was the latest labour report which triggered the most concern over the pound last week as markets reacted poorly to a slide in UK wage growth.

The losses in the GBP exchange rate were then accelerated during the middle of the session, when June’s consumer price index revealed that inflation failed to rise last month as forecast, instead holding at a one-year low.

The final blow came in the form of June’s retail figures, with a shock contraction in sales propelling Sterling to new multi-month lows, and even breaking below the $1.30 barrier against the US dollar in the process.

While the string of lacklustre data was damaging enough for the Pound, its losses were accentuated by fears that the gloomy releases could prompt the Bank of England (BoE) to rethink plans to raise interest rates next month.

A lull in high-impact data may offer some respite to the GBP exchange rate this week, although losses could still be driven by Brexit developments, especially if the EU remains sceptical about the feasibility of the plans put forth in the UK government’s White Paper.

Furthermore a speech by the BoE’s Ben Broadbent could prompt some movement at the start of the week’s session, with investors looking for any indications of whether the bank is likely to push forward with a rate hike in August.
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