Disappointing economic data coming out of the UK has raised doubts that the Bank of England will be able to follow through on its hawkish signals, reports Bloomberg. The pound is set for weekly losses versus almost all of its G-10 peers.
- Manufacturing was down 0.2% from April on biggest drop in vehicle production in more than a year
- Total industrial output was down 0.1%
- House prices saw quarterly drop of 0.1% and a 1% drop from a month earlier
- “Sterling is going to be highly sensitive to data” given the talk of tighter BOE policy, says Viraj Patel, a currency strategist at ING Groep NV in London
- “The Bank of England has put this discussion of rate hikes onto the table and essentially now markets are looking for validation in the data to either support or dismiss the case for a rate hike in 2017”
- “The trend has been on a softer footing for U.K. data,” Patel says. “You’re going to get disappointing U.K. data and all that’s going to do is push the case for a rate hike into 2018” and weigh on sterling