The pound starts this week relatively unchanged from Friday against its major rivals after UK inflation figures caused it to fall.
Compared to last Monday, GBP/USD is trading 1.75% lower and GBP/EUR is close to 0.5% lower. However, this morning’s reports have questioned whether the UK economy is still a global outlier, as figures have shown unexpected economic resilience and a sharp decline in inflation.
This comes just a few weeks after the UK was the only G7 economy not showing a steady downward trend in price growth, despite having the highest inflation rate.
On Friday, the Office for National Statistics (ONS) reported that the UK monthly retail sales data rose 0.7% in June following a 0.1% rise in May. This was higher than the forecasted 0.2%.
Late last week UK economists were divided on how the upcoming Bank of England interest rate decision will pan out on August 3. Markets had locked in a 50-basis point prediction, but due to slower inflation, a large number of investors are leaning towards a 25-bps hike.
On Friday natural gas futures in Europe rose more than 6% to nearly €30 megawatt-hour. It’s believed this is due to the heatwave in Europe and lower wind speeds across the continent.
It’s a busy one for US data this week, with the Federal Reserve’s interest rate decision on Wednesday, advance estimates of quarter 2 GDP growth and earnings from several large corporations.
Additionally, this week will see interest rate decisions from the European Central Bank and the Bank of Japan. Investors will also be keeping an eye on inflation rates for France, Germany and Spain. Later today, we will receive data for the UK and US S&P Global preliminary PMIs.
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