The pound (GBP) has been relatively steady so far in in 2017 compared with last year’s slump, but recent data suggests that consumer confidence, in the form of retail sales, is faltering as inflation rises and Britain’s Brexit negotiations draw ever closer. Parliament was holding a second day of debate over Brexit yesterday, but it was Mr. Carney’s appearance at a separate committee which was the bigger focus.
Bank of England (BoE) governor Mark Carney came face-to-face with the Commons Treasury Select Committee. In testy exchanges and in stark contrast to the dire warnings he issued before the referendum, he acknowledged that the UK’s divorce from the EU may yet proceed smoothly and it would mean a higher path for interest rates.
Today sees revised fourth-quarter Gross Domestic Product (GDP) figures. Following the release of much worse than expected retail sales data last week, this figure will be watched very closely. A revision downwards could have a drastic impact on the pound. In the medium-term, political risk remains the principal driver for the pound, not data. This risk is expected to intensify once formal Brexit negotiations begin.