UK political uncertainty drags on GBP
[vc_row][vc_column][vc_column_text]The pound continued to struggle last week as heightened political uncertainty in the UK capped demand for GBP.
Sterling continues to trade in a narrow range at the start of this week as well, with GBP/EUR muted at €1.1225, while GBP/USD is flat at US$1.2591.
Looking to the week ahead, the session looks to be dominated by policy meetings by the Bank of England (BoE) and Federal Reserve as the central banks deliver their latest forward guidance.
The pound remained mostly subdued last week as heightened political uncertainty in the UK and some mixed economic data left the currency struggling to find momentum.
Initially weakening the pound at the start of the week was the release of the UK’s latest GDP figures, which revealed that the UK economy suffered its worst monthly contraction since 2016 as growth slumped 0.4% in April.
Sterling was quick to pare these losses on Tuesday however as GBP investors welcomed the publication of some stronger-than-expected UK employment figures as UK wage growth unexpectedly accelerated in April.
The second half of the week was then dominated by the Conservative leadership contest, with the pound briefly climbing as Boris Johnson took a convincing lead in the first round of voting, before fading again as markets grew concerned by the rising likelihood of a no-deal Brexit.
Looking ahead, the Tory leadership race is likely to continue to influence GBP exchange rates this week, with the next round of voting scheduled to take place on Tuesday.
However potentially having a greater impact on Sterling sentiment this week will be the Bank of England’s latest policy meeting, with GBP investors watching to see if the BoE still believes that markets are ‘underestimating’ the pace at which it will raise rates, or whether it will adopt a more cautious outlook in light of signs that global growth is slowing.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]
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* Information courtesy of Currencies Direct, Philip McHugh
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)
The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information. This article was written by Currencies Direct.
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