The Pound Sterling earlier struck a 5-week trough versus the US Dollar with wary traders concerned about the repercussions of a disappointment GDP read. The GDP figures for the first quarter are due out tomorrow and economists polled are predicting that the UK’s economic growth will have contracted to 0.03% from 0.04% (quarter-over-quarter). Currency strategists say that with the Bank of England’s more dovish stance and last week’s disappointing data that another disappointment tomorrow would wipe away any hopes for a BoE rate increase next month.
As reported at 10:47 am (BST) in London, the GBP/USD was trading at $1.3937, up 0.03%, moving away from the 5-week trough set at $1.3895 while the peak is at $1.3950. The EUR/GBP is up 0.14931% and trading at 0.87436 Pence; the pair has ranged from a session low of 0.87280 Pence to a peak of 0.87505 Pence.
Uncertainty over Rate Hike Hopes
Tomorrow’s release of GDP data will be the last piece of the Monetary Policy Committee’s policy puzzle before it meets next month. Up until recently, a May rate hike was priced in at about 80%, as evidenced by swap markets. Now, however, uncertainty has resulted in a near even split with only 50% believing a rate increase will be pushed through next month. Mark Carney, the head of the BoE, succeeded in dashing expectations with his recent comments about mixed data and there being “other” meetings for the BoE later in the year.