- The Pound Sterling exhibits a weak performance against North American and other European currencies but is upbeat against most Asia-pacific peers in Friday’s London session. The near-term outlook of the GBP is expected to remain uncertain as investors shift focus to the Bank of England’s (BoE) monetary policy meeting, which is scheduled for Thursday.
- The BoE is widely anticipated to keep interest rates steady at 5.25%. Therefore, investors will majorly focus on the number of policymakers who will vote in favor of a rate-cut decision. In the May meeting, BoE Deputy Governor Dave Ramsden joined policymaker Swati Dhingra and voted for lowering interest rates by 25 basis points (bps) to 5.0%. In the press conference, BoE Governor Andrew Bailey acknowledged significant progress in inflation declining to 2% but remarked, “We are not yet at a point where we can cut the base rate," EuroNews reported.
- Currently, financial markets are split between August or September meetings regarding when the BoE could start reducing interest rates. Before the BoE outcome, investors will focus on the CPI report for May, which will be published on Wednesday. UK headline inflation appears to be on course to return to the desired rate of 2%. However, service inflation that is driven by wage growth continues to be a major concern for policymakers.
- The latest UK Employment report showed that Average Earnings, which is a wage inflation measure, grew steadily in the three months ending April. The pace at which wages are growing is significantly higher than what is needed to bring inflation down to BoE’s target.
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