020 7898 0500Yesterday’s disappointing UK retail sales capped a miserable end to the week for sterling, which suffered further losses against the euro and dollar. It sank below the $1.30 level to hit its lowest level against the greenback for ten months. Reuters also reported the pound hit an eight-month low against a basket of rival currencies.
The moves are the result of the significantly dampened expectations of an interest rate rise in August. What was not long ago felt to be almost certain is now in doubt. While the Bank of England might yet decide to hike rates, the evidence to support such a move is becoming thinner and thinner. Slowing wage growth, inflation holding steady and now poor retail sales have all combined to give policymakers a headache.
Meanwhile, the IMF warned that a no deal Brexit would harm the UK economy by wiping a whopping 4% off its GDP. The EU wouldn’t get off scot free either and it has been estimated the eurozone could lose as much as 1.5% off its GDP by 2030. Today we will see the public sector net borrowing figures for June, with the deficit expected to widen from £3.36 billion to £3.5 billion.
The chart below shows the pound’s movements against the dollar over the past month. As you can see, it’s not a pretty picture.
