Despite some poor GDP statistics on Monday, the pound had an uplifting Tuesday against its currency rivals. The possible rate cut from the Bank of England still looms over sterling, but the markets seem to be reacting more to yesterday’s inflation data.
Analysts have noted that this has increased the chances of a cut to interest rates, which the Bank of England’s Monetary Policy Committee have already hinted at. However, inflation rates could rise to 1.6% in the first three months of 2020, if the “Boris bounce” following the General Election materialises. Business confidence rose in the days after the Conservative Party won a strong majority of 80 seats.
Euro And Dollar Hold Steady
Across the Atlantic, the dollar has been hit by weak inflation statistics. It’s now unlikely that the Federal Reserve will tighten rates any time in the near future.
There hasn’t been that much economic data to hit the euro, with analysts still looking at it cautiously. Germany seems to have narrowly avoided the recession, and there are still concerns about the prospect of a trade war with the US. The automotive industry fear that their industry will be the next to suffer in President Trump’s policies designed to boost domestic manufacturing.
This, combined with Brexit, and the possibility that UK Prime Minister Boris Johnson will want to negotiate trade deals with the EU and the US at the same time, might be problematic for the euro.
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