Sterling moved away from a four month low against the dollar yesterday, but still remained 4% weaker than two weeks ago. This continued weakness may be down to speculation about the health of the British economy. The Bank of England (BoE) is positive about this, but disappointing reports from last week from the UK’s Purchasing Managers’ Index (PMI) raised doubts thanks to the news that growth is at its slowest rate in two years. It is believed that this is down to the latest worries over market volatility and global growth – and while BoE Governor Mark Carney has expressed optimism over the UK’s ability to weather this latest storm, traders have not been so forgiving especially as a strong pound impacts exports.
No significant data will be released from the UK today. We expect investors to be waiting until Thursday, when the BoE’s nine person Monetary Policy Committee (MPC) will meet. Sterling could likely benefit from any indication about the long discussed interest rate hike in the accompanying minutes that are released after the meeting.