Despite this morning’s better than expected GDP data, sterling nervously awaits a busy week of key data releases ahead. The pound’s nervousness is reflected in markets as it begins the day marginally weaker than both the euro and the US dollar compared to this time last Monday. This comes ahead of the BoE’s interest rate decision, and the UK’s latest inflation data which are both scheduled to be released this week.
In its last monetary policy meeting, The BoE voted by a majority of 7-2 to raise interest rates by 75 basis points to 3%. This was the largest rate hike in over three decades, pushing UK borrowing costs to their highest levels since late 2008. This was against a backdrop of inflation hitting a 40-year high in September plus a weakening economic outlook.
On Thursday, the Bank is expected to raise interest even higher as markets price in a 3.5% rate.
