The pound dropped to a fourteen month low against the dollar on Friday. It was still reeling from Wednesday’s Bank of England inflation report. The central bank cut inflation and GDP forecasts; 2014 CPI forecasts were cut from 1.9% to 1.2%, 2015 CPI was cut from 1.7% to 1.4% and 2015 GDP was cut from 3.1% to 2.9%.
The bank also predicted that inflation will fall below 1% over the next 6 months. It wasn’t all bad news however. Data released on Wednesday morning showed that average earnings beat expectations and Governor Carney went on to say that he expected average salaries to grow by 2% by the end of 2015. It failed to save the pound though and cable went on to break down through various stop-loss levels (the main support level being 1.57) falling to a low of 1.5656.
By Alex Edwards at UKForex, an international money transfer service
There was also healthy demand for EUR/GBP towards the end of this week, which did in turn put further pressure on GBP/USD. EUR/USD bumped higher towards the end of the week and for a moment looked like it might push on through 1.25. It didn’t and traded to a high of 1.2491. French GDP printed better than market forecasts at 0.3% q/q vs. expectations for 0.1% q/q on Friday, which gave the single currency a boost.
There wasn’t much by way of top tier US economic data last week, but the greenback was generally better off. It finished the week stronger across the board, especially vs. the commodity currencies. Glencore, a world mining giant, announced on Friday that it will be shutting down Australian coal operations for three weeks in December in response to current oversupply of the commodity. This heaped pressure on the Aussie not long after Assistant RBA Governor Kent failed to rule out possible FX intervention as he jaw-boned the currency lower. That said, both AUD and NZD remain firm against the pound.
Focus early next week will be on a speech from ECB President Draghi. His position as ECB president has been questioned of late, but his comments will no doubt be centred on monetary policy. UK inflation data is due on Tuesday and we are due MPC minutes on Wednesday. Likewise, US FOMC minutes are due later that same day and U.S. inflation figures are released on Friday. It’s going to be a busy and perhaps defining week. Momentum can be difficult to break and if UK data continues to disappoint we might see GBP/USD move to new and lower territory.
More: What To Do With GBP At Current Levels? – Credit Agricole
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