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Pound nosedives as BoE rate cut speculation runs rampant following dire GDP reading

currency-newsPound nosedives as BoE rate cut speculation runs rampant following dire GDP reading

The pound stumbled out of the gate this week, falling sharply during Monday’s trading session in response to the UK’s less-than-impressive GDP figures.

Sterling remains on the back foot this morning, with GBP/EUR subdued at €1.1643, GBP/USD muted at $1.2972, and GBP/CAD rangebound at C$1.6950. GBP/AUD and GBP/NZD have dipped to AU$1.8783 and NZ$1.9563 respectively.

In the spotlight today we have the latest US consumer price index. Will an acceleration in inflation lend some support to the US dollar today?

What’s been happening?

The pound dived sharply yesterday as investors reacted to the UK’s underwhelming GDP print.

According to data published by the Office for National Statistics (ONS), economic growth fell from 0.1% to -0.3% in November, missing already weak expectations that growth would have stalled at 0%.

The abysmal reading also comes hot on the heels of recent comments from Bank of England (BoE) Governor Mark Carney, who suggested the bank may need to act ‘promptly’ if weak growth persists.

This led to a significant slump in Sterling sentiment as economists speculated on the possibility of the BoE cutting interest rates in January.

Meanwhile, the US dollar was mostly rangebound through Monday as demand for the safe-haven currency was capped by US-China trade optimism and easing tensions in the Middle East.

The euro also struggled to find direction at the start of the week amid a lull in notable EU economic data.

What’s coming up?

On the docket for today we have the publication of the latest US consumer price index.

This could see the US dollar strengthen later this afternoon if the CPI figures show US inflation accelerated in December, further weakening the odds that the Federal Reserve could seek to ease monetary policy again in 2020.

For EUR investors the focus will be on a speech by the European Central Bank’s (ECB) Yves Mersch as traders look for more hints on how the bank will shape monetary policy in 2020.

Finally, in the absence of any notable UK economic data, GBP investors may remain focused on the BoE today, likely exerting pressure on the pound if the odds of a January rate cut continue to climb.

Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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