Sterling enters the week approximately 0.30% stronger against the euro after outpacing the single currency on Friday, as investors anticipated continued tightening in this week’s Bank of England (BoE) decision. The BoE is expected to hike the UK’s interest rate by 25 basis points, to 4.75% this Thursday.
Against the US dollar, the pound boasts weekly gains of 1.76%, after touching its highest level since April 2022 on Friday.
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Investors will have lots of high-impact economic data to digest over the course of this week. Tomorrow dollar-watchers will see the latest preliminary figures for building permits as well as a speech from the Federal Reserve’s (Fed’s) chief executive officer of the Federal Reserve Bank of New York, John C.Williams.
There will also be the release of the UK’s latest monthly, yearly and core inflation results, all before the Bank of England’s big interest rate decision on Thursday.
Former governor of the Bank of England, Mark Carney, has said, Brexit is to blame for high inflation driving the cost of living crisis in the UK. According to Carney in an interview with the Telegraph, “We laid out in advance of Brexit that this will be a negative supply shock for a period of time and the consequence of that will be a weaker pound, higher inflation and weaker growth.”
He added, the BoE “will need to lean against that. Now that’s exactly what’s happened.”
The Fed’s Chair, Jerome Powell, will give two testimonies this week – one tomorrow and another one on Wednesday. His speeches follow the Fed’s latest decision to pause rate hikes in its June meeting, leaving the rate at 5.25% as expected.
Investors all over will be listening out for any hawkish comments which could boost the dollar.
In the Eurozone, consumer price inflation was confirmed at 6.1% in May 2023, marking the lowest inflation rate since February 2022. Despite this, the rate remained over three times higher than the European Central Bank’s 2% target.
US stocks rallied at the end of last week ending with mixed results. The Dow Jones gained almost 60 points, after a nearly reaching a 150-point gain, while the S&P 500 and the Nasdaq also eased their 0.4% gains.
