On Monday the pound fell by 0.5% to two and a half week lows against the dollar as poor economic figures increased the chances of the Bank of England cutting their interest rates.
With the UK’s industrial production coming in lower than forecasted and the monthly GDP for November showing that the British economy has slowed by 0.3%.
An Economist at the Office for national statistics said that this now means we will need growth of approximately 0.1%-0.2% in December These figures were closely followed by Bank of England monetary policy member Gertjan Vlieghe, who stated that he would be ready to back a rate cut if the economic growth fails to improve.
They will be looking closely at the GBP CPI (Consumer Price Index) being released on Thursday which will give them a good indication on what they would like to do, and this piece of data is now likely to be a big mover of the markets.
This Morning the rate slightly recovered (0.1%) due to an interview with Boris Johnson on the BBC in which he stated that it is ‘very likely we get a comprehensive deal with EU by year end’.
However, when asked if he could put a percentage on the likelihood of a deal being made, he declined the offer. This initially put a stop to the decline in the GBPUSD rate as it increased by around 0.2% but has since retraced due it being hard to gain a lot of certainty from the traders simply because of the lack of time to get the deal done.
Moving on to economic data, we have a lot of data for the US today including the US CPI and retail sales figures which will likely have an impact on the GBPUSD rate.