020 7898 0500Sterling closed the week up against the US dollar, mainly due to the Bank of England expressing optimism. The BoE struck an unexpected hawkish tone in its meeting minutes.
Brexit updates last week included the Queen giving Royal Assent to the Brexit Bill, clearing the way for Theresa May to trigger Article 50. Scotland was pushing for a new vote on independence. And on Friday, there were rumours that the European Union would only discuss transitional Brexit arrangements and a potential UK trade deal if the British government paid an exit bill.
There was no major data released on Friday.
Looking to the week ahead, markets will focus on further news surrounding Brexit and Article 50. On Tuesday the preferred reading on inflation is due. Since September we’ve seen inflation push higher to 1.8% from 0.6%. The BoE is forecasting its 2% target to be exceeded later this year.
Inflation is one of the key components required for raising interest rates. Economist reckon that there is now an around 95% chance of a 25-basis-point rate increase by September 2018. Before the comments from the BoE last week, it was just 60%. Businesses should note that interest rate hikes are becoming more likely and inflation is now another factor contributing to uncertainty, making it even more difficult to forecast budgets.
This Thursday retail sales figures will be released. So far this year we’ve seen two consecutive months of negative numbers. Markets will be keen to see if the trend continues. Consumer spending makes up a large proportion of the GDP number.
