The pound has recovered despite the Brexit political crisis, which has escalated given the British government's decision to push for a bill that would undermine the exit deal with the European Union. If approved, the proposal (which is known as the Internal Markets bill) would allow Britain's government to override parts of the withdrawal accord, something that would be unacceptable for the European Union and could undermine the United Kingdom's position as a credible partner in the international community.
Apparently, the government has backtracked on its decision to support this controversial bill since then, which has further aided the performance of the pound. The Prime Minister Boris Johnson reached a deal with members of his political party that opposed the bill, giving them the power to veto any decision that could give the government the ability to override the withdrawal agreement.
This week, the markets have got important information about the state of the British economy. On Tuesday, the Office for National Statistics stated that the claimant count change for August stood at 73.700, increasing from July's 69.900 and below the analysts' expectations, who foresaw it to be at 100.000. This left the Claimant Count rate at 7.6 percent in August, after being at 7.4 percent in the previous month.
In July, average earnings including bonus dropped by 1 percent, improving from the previous month's figure which was at -1.2 percent and below the analysts' expectations, who foresaw it to fall by 1.3 percent. Excluding bonus, average earnings increased by 0.2 percent in July, after dropping by 0.2 percent in June, over the analysts' expectations, who foresaw it to remain unchanged.
The unemployment rate in the three months into July was at 4.1 percent, in line with the analysts' expectations and over the previous month's 3.9 percent.
On Wednesday, the markets learned that the consumer price index hit a five-year low, mainly due to the British government's backed eating out scheme. The CPI stood at 0.2 percent (year-to-year) in august, below July's 1 percent and over the analysts' expectations, who foresaw it to be at 0 percent. In monthly terms, the consumer price index dropped by 0.4 percent, after increasing by 0.4 percent in the previous month and over the analysts' expectations, who foresaw it to be at -0.6 percent.
Excluding food and energy prices, the CPI was at 0.9 percent in august (year-to-year) after being at 1.8 percent in July and below the 0.6 percent that the analysts expected. In yearly terms, the retail price index stood at 0.5 percent, below the 0.6 percent expected by the analysts and lower than July's 1.6 percent. In monthly terms, the index was at -0.3 percent, remaining in line with the analysts' expectations and below July's 0.5 percent.
The Producer Price Index remained unchanged in August (month-to-month), below the previous month's figure which stood at 0.3 percent and smaller than what the analysts expected, who foresaw it to be at 0.2 percent. In yearly terms, the Producer Price Index dropped by 0.9 percent, unchanged from the previous month's figure and below the analysts' expectations, who foresaw it to be at -0.7 percent.
Today the Bank of England is expected to announce its monetary policy stance. Analysts expect the bank to leave the cash rates and bond-buying program unchanged.