FX round-up: Pound weaker ahead of MPC meeting, but up against US dollar
Sterling brushed of another spate of weaker than expected data heading into the Monetary Policy Committee’s meeting the next day.
Economic growth in Britain slowed to a 0.3% quarter-on-quarter clip over the three months ending in April, the National Institute for Economic Research said, coming in well beneath the 0.5% pace which analysts had pencilled in.
Earlier on Wednesday ONS said UK industrial production rose by 0.3% over the month in March (consensus: 0.5%), shrinking by 0.4% quarter-on-quarter in the first three months of 2016 on top of a similar decline in the previous quarter.
Cable was higher by 0.19% to 1.4469 by the closing bell, but only by default as the US dollar index registered a broad retreat, sliding by 0.54% to 93.778.
Against the Japanese yen on the other hand the pound surrendered 0.53% to close at 156.96 following gains in the previous session after the Asian country’s finance minister warned traders that intervention in foreign exchange markets was a possibility if deemed necessary by Tokyo.
The pound was also weaker against the single currency, falling by 0.35% to 1.2654.
Euro/dollar was predictably higher, rising by 0.54% to 1.1434 in a risk-off environment.
On Thursday, Bank of England rate-setters were widely expected to stay put on policy.
However, over the previous weekend analysts at Bank of America-Merrill Lynch told clients they expected MPC member Gertjan Vlieghe to break ranks with his fellow policy-makers and vote for an immediate reduction in Bank Rate given what appeared to be a sharp slowdown in the economy running up to the 23 June Brexit referendum.
Barclays also thought Vlieghe was likely itching to vote for a cut but thought that was unlikely before that critical June vote.
On the previous day, NIESR had warned that the trade-weighted pound would drop by 20% should Britons vote to leave the EU.