Pound weakens on dovish BoE and weak growth data
The Pound has lost ground this morning following weak UK growth figures and negative Bank of England policymaker comments over the weekend.
The NIESR GDP figures have estimated growth over the last 3-mths as -0.3% which is a notable miss and suggests the UK economy did mildly contract in the last quarter of 2019. Although these figures largely encompass the pre-election sentiment, it’s still not great reading for the BoE and the Pound.
Last week, Mark Carney warned that the BoE would take “prompt” action to tackle any economic downturn and had plenty of headroom and tools available to do this (i.e. interest rate cuts/QE). Over the weekend, another BoE policymaker also hinted at a possible rate cut. Gertjan Vlieghe stated that he will consider voting for a rate cut at their next meeting but will be closely monitoring how the economy has performed since the December election before making any decisions.
The next BoE rate-setting meeting isn’t until the end of the month (30tH Jan). The UK data releases between now and then will therefore take more significance compared to previous months, as Brexit has massively overshadowed these releases of late. Two of the key pieces of data will be this Wednesday’s inflation numbers and then employment/wage data out on Tuesday 21st.
As a result, the Pound has given back over 2-cents against the USD from last week’s high and now trades at a 2.5-week low. The GBP/EUR has lost around 1% from last week’s high and trades at the lowest levels since Boxing day.