A poor week for sterling has seen it lose significant ground against both the euro and US dollar following the latest inflation report from the Bank of England (BoE).
A steady start to the week saw sterling make slight gains against both the euro and US dollar as global markets saw little data of considerable impact released and bank holidays across the US and Europe impacting trading volumes. Wednesday saw sterling drop sharply across the board as the Bank of England cut its growth forecast for the UK economy and predicted that UK inflation could take 3 years to reach their 2% target. With the report suggesting the UK’s economic growth may have lost steam over recent months, expectations for an eventual rate hike by the BoE has been pushed back to the back end of 2015 causing significant sterling weakness.
The downward trend continued throughout Thursday, with sterling hitting a 14-month low against the US dollar as London house prices fell to their lowest level since October 2010.
Investor focus will be turned away from the UK today, with economic growth and inflation data from the Eurozone taking centre stage. Retail sales data from the US is also likely to provide some market movement, while monthly UK construction output will have a more muted effect.