020 7898 0500The pound hit the dizzy heights of a 10-month high against the US dollar on Friday, climbing 1% after data further undermined expectations for more hikes in US interest rates. Indeed, after a rough start to the week which was driven by poor data from the UK, sterling ended the week on a high after riding out a series of negative headlines on Brexit negotiations with the European Union.
MOVEMENTS GBP/USD FOR THE LAST MONTH IN CHART BELOW
Overall, the market thinks it’s too early to know the direction Brexit negotiations will take and so sterling isn’t expected to rally much further. We are still not quite at the highs we were when the market predicted a landslide victory for the Conservatives following Theresa May’s call for a snap election.
The speculation around possible UK interest rate rises in the coming months has also buoyed the pound, with an outside chance of a rate rise as early as next month. UK data last week showed that British workers also saw their pay fall further behind inflation in the three months to May, although wages rose marginally more than had been expected.
This week sees further UK inflation data on Tuesday, which is forecast to fall slightly, and retail sales on Thursday, which are expected to grow. These will be watched closely for further signs of support for an interest rate rise.
