Sterling Drops as UK Debt Rises; BoE Comments on Interest Rates Cancel Each other Out to see GBP-USD at a Disadvantage
The Pound Sterling has dropped from a high of 1.5561 at the start of the week to a low of 1.5438 today, following the news that the UK Public Sector Net Borrowing figures and the variant Excluding Banking Groups have both risen over estimates. The Pound dived after the results were released, as both sets of figures exceeded forecasts by over £2bn.
The Pound hasn’t been helped recently by comments from Bank of England (BoE) officials; last week, BoE Chief Economist Andy Haldane warned against a UK interest rate increase in the near-future, saying: ‘In my view, the balance of risks to UK growth, and to UK inflation at the two-year horizon, is skewed squarely and significantly to the downside. Against that backdrop, the case for raising UK rates in the current environment is, for me, someway from being made.’ By contrast, BoE Deputy Governor Jon Cunliffe has stated today: ‘We’ve got to look 18-24 months ahead but if you put that economic picture together it seems that the next move on monetary policy would be up and also looks as if it will be a limited and gradual rise when it happens’. The overall effect of both of these statements has been a neutral one, given that they effectively contradict each other, being delivered by similarly high-level officials from the same organisation.
GBP-USD Future Uncertain as US Results Outnumber and Outgun Sterling’s Planned Releases
For the rest of the week, movement in the GBP-USD pairing is expected to come chiefly from the influence of the US Dollar, as the only remaining expected Pound-related news of interest is the BBA Loans for House Purchases out on Thursday. A rise from 46033 to 47000 is predicted, although this may not be enough to hold Sterling’s conversion rate steady due to the relative abundance of US results.
Even as early as today, the US monthly House Price Index for July is out, and a 0.2% rise is on the cards. Later on today, Fed Bank of Atlanta President Dennis Lockhart will give a speech on the US economy in Alabama, just one of a number of planned speeches by Fed officials. Tomorrow, the US Mortgage Applications and Manufacturing PMI are due, along with another speech by Lockhart, this time in Georgia.
Along with the last UK results of the week, Thursday also brings the high-importance US Durable Goods Orders for August, along with New Home Sales figures and Claims data. Also due is a lecture by influential Fed Chair Janet Yellen in Massachusetts. Finally, Friday brings the US Q2 GDP, further PMIs and the University of Michigan Confidence Score. In addition, speeches are expected from Fed Bank of St. Louis President James Bullard in Missouri and Fed Bank of Kansas City President Esther George in Nebraska.