Last week saw the sterling come under fire as the BOE confirmed that the Brexit vote has and will have a large impact on the competitiveness of the UK economy and most of all adverse effects on consumer confidence, prompting the bank to take protective measure, increasing the money flow in the economy by cutting the cash rate to 0.25% and increasing the asset purchase facility by 60B as they look to kick start the UK economy.
In the US a different picture is being painted with the latest employment data showing that the US employment sector is bouncing back with a steady increase in wage inflation, which all hints at an upcoming increase in consumer confidence, prompting markets to price in a higher probability of a US rate hike in upcoming months, resulting in an appreciation of the USD against its counter parts.
Given the diverging nature of the two economies, it is likely that we will see the GBPU USD fall further to perhaps even 1.2500 in the next months as markets jump ship from the pound and re-enter the greenback longs they left behind.
Today’s key economic data is as follows:
- Building Permits m/m expected at 2.7%
- NAB Business Confidence previously at 6
- CPI y/y expected at 1.7%
- PPI y/y expected at -2%