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Bank of England forecasts drive GBP down

Bank of England forecasts drive GBP down

Yesterday saw the Pound get what is known in the markets as “a good old kicking”, after the Bank of England released wage growth forecasts, economic growth forecasts and unemployment figures.

The standout figure from the inflation report was that the Bank of England wage forecast had been halved to 1.25%, which is the slowest rate since records began in 2001. Whilst the forecast for economic growth rose to 3.5% for the year and the unemployment rate fell more than expected, it was the wage forecast which drove GBP down.

 

Why is this figure so important?

Simple really. This figure has made it highly unlikely that the Bank of England will start increasing interest rates any time soon and certainly not by the end of the year. When GBP started its move against the majority of currencies a few months ago, it was very much based on the confidence of a rate rise. Without the rate hike, there are not as many simple reasons to push GBP further. However, to add a little bit of sunshine into the mix, when you look a bit deeper into UK figures there are still a few reasons to be optimistic.

Problems in the Eurozone as well, as German GDP shrank more than expected, France suffered from stagnation and Italy is suffering from a triple-dip recession. Things are going to be directed by the Russia-Ukraine situation over the next few months, as inflation in the Eurozone is running at its lowest level since 2009 and the measures implemented by the ECB are taking time to have any effect.

In the US, meanwhile, disappointing retail sales figures were released, showing no growth whatsoever despite expectations of a small growth.

 

What’s out Today…

News out today includes CPI and GDP from the Eurozone, GDP from Portugal and a variety of figures from the US including initial and continuing jobless claims.

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