Pound faces a big week

The British pound has had a disastrous run over the last couple of weeks on the back of instability amoung other things and this week is shaping up as a do or die week for the currency on the question of higher interest rates.

British Prime Minister Theresa May faces the prospect of losing a vote on her Brexit plans which would leave her vunerable to a leadership challenge and there are many candidates waiting in the wings such as former Foreign minister Boris Johnson who recently resigned.

 This is markets bracing themselves for a 'no idea' Brexit & a possible leadership challenge to May. Government defeat tonight will be a reality check of crisis. Near-term outlook for GBP looking negative," says Viraj Patel, a foreign exchange analyst with ING Bank N.V. in London.

Apart from political turmoil, the pound also faces a raft of economic data this week such as industrial production figures and retail sales numbers as well as the all important wage growth figures.

If one or more of these releases come in under expectations it will only add further to the case that the BOE should leave rates on hold next month and the pound will only see further losses.

"This data could fuel Bank of England concerns and uncertainties over the economy and there can be very little doubt that the Monetary Policy Committee (MPC) will leave interest rates unchanged at their June meeting next week," said Howard Archer, chief economic advisor to the Ey ITEM Club.

 


Analyst

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