Quarterly Inflation Report to shed light on the BoE’s future policy

Sterling received a further boost on Friday morning after Purchasing Managers’ Index (PMI) data for the construction sector followed the general trend of a better-than-expected figure. The index was up from July’s figure, which was its lowest in seven years. However, the number is still indicating that the sector is contracting. There are widespread reports that Brexit uncertainty had dampened demand and slowed progress on planned developments, especially in relation to large projects. The ongoing uncertainty with conflicting housing reports is not going to help investor appetite.

Looking to the week ahead, there are two major events in the calendar that could affect sterling price action. Firstly, this morning we have the release of PMI service sector data. This is the dominant reading out of the three surveyed sectors (services, manufacturing and construction). This is largely due to the UK being a service-led nation, with the sector contributing to roughly 70% of the nation’s Gross Domestic Product numbers.

Manufacturing production data is due on Wednesday, but the main focus of the day is the Bank of England (BoE)’s quarterly inflation report. During these hearings the BOE Governor and several members of the Monetary Policy Committee testify on inflation and the economic outlook before Parliament’s Treasury Committee. With the upbeat data of late, there will be question marks over the timing of the latest bout of stimulus, as well as the recent interest rate cut. The market will also be keen to decipher the rhetoric that follows to determine the future outlook of monetary policy moving into the final quarter of the year and beyond.

If you are looking to buy or sell sterling, we suggest contacting your trader now for live rates, news and currency-purchasing strategies.